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Wheat Futures Rally on Lower Short-Term Global Supplies

February 7, 2017 at 18:20 by Andrew Moran

Wheat futures rallied on Tuesday as global supply concerns by traders were dampened. Despite a market supply glut, the numbers suggest that the output levels are not as immense as initially projected, at least for the short-term.

March wheat futures climbed $0.0325, or 0.77%, to $4.257 per bushel at 16:52 GMT on Tuesday on the Chicago Board of Trade (CBoT). Wheat pared most of its losses that were incurred in the morning part of the trading session. Wheat prices have had a strong start to 2017 as prices have surged more than 4% year-to-date.

Wheat prices were supported by reports suggesting that the supply glut may not be as huge as first forecast. The US Department of Agriculture (USDA) announced on Tuesday that wheat exports in the US are 65.7% of the government’s forecast. Officials said in a report last month that American farmers had slashed their winter wheat plantings to their lowest levels in more than a century because of soaring global supplies. With the winter wheat crop now in dormancy until early spring, the supply glut may be quite a bit lower than what many investors had first feared.

Investors will be paying close attention to the USDA’s upcoming World Agricultural Supply and Demand Estimates (WASDE) report. The report is scheduled to be released at noon on Thursday.

The biggest headache for traders are the wheat exports coming out of Brazil. Traditionally one of the world’s largest wheat importers, Brazil has exported several shipments of wheat due to a government subsidy and a massive domestic crop. This may add to the international supply glut in the second quarter.

Overall, wheat prices may record a sharp but short rally until around March, or during the growing stage. Wheat stocks are anticipated to be larger in 2017 than last year’s, which could boost supplies.

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