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Wheat Futures Dip amid Supply Glut, Weather Reports

January 12, 2017 at 18:16 by Andrew Moran

Wheat futures have fallen for the third consecutive trading day as supplies of the grain climbed to a 29-year high. Wheat prices are also trading at one-week lows on reports that weather is improving in the US plains and Black Sea regions.

February wheat futures tumbled 0.2% to $4.18 per bushel at 16:46 GMT on Thursday on the Chicago Board of Trade (CBoT). This comes as wheat futures settled the previous day down 1.9% as prices dipped to a one-week low. Wheat futures on the CBoT have plummeted four years in a row.

Global supplies and weather reports are contributing to wheat’s losses this week.

According to a new report from the US Department of Agriculture (USDA), American farmers reduced their winter wheat plantings to their lowest levels in 107 years because of the ballooning supplies. The report discovered that US winter wheat seedings plunged to 32.383 million in the 2016/2017 marketing year, down from 36.137 million in the previous year. This is the smallest winter wheat acreage since 1909 when farmers planted 29.196 million seedings. It is also the second lowest in US history.

In today’s market, the cost of production is a lot higher than the current price. Ostensibly, if there is a massive decrease in acreage by as much as 10% then it could support wheat futures in the short-term.

Meanwhile, favorable weather conditions in the US plains and Black Sea regions are sending wheat futures lower. The latest weather forecasts suggest that upcoming weekend storms in Kansas and Oklahoma would spur soil moisture and remedy the dry conditions. The US plains have also been hit by a significant cold front since December. In Russia and the Ukraine, layers of snow are potentially preventing winter crops from being devastated by severe frost conditions over the past month.

Corn has also been unable to muster up a rally on Wednesday. February corn futures fell 0.28% to $3.562 per bushel.

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