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Wheat Plunges As Prices Face Pressure From Global Inventories

April 16, 2019 at 15:44 by Andrew Moran

Wheat futures are plunging on Tuesday as the agricultural commodity faces increasing pressure from soaring global stockpiles. Investors are also keeping a close eye on a US delegation visiting Brazil to discuss with industry leaders about higher import demand amid incoming quotas from the government.

May wheat futures tumbled $0.1175, or 2.56%, to $4.4775 per bushel at 15:03 GMT on Tuesday on the Chicago Board of Trade (CBoT). Wheat has joined domestic agriculture’s bear market, plummeting more than 12% so far this year, and analysts do not anticipate wheat prices to spike anytime soon.

According to the US Department of Agriculture (USDA), global wheat prices will be weighed down by ballooning inventories and improving US yield prospects. In its monthly report, the USDA reported that the forecast for global 2018–2019 wheat ending stocks will come in at 275.61 million tonnes, beating median estimates.

This week, a US delegation representing the wheat industry is in Brazil to meet with producers, millers, and food industries to determine what import demand will be like once a tariff-free quota system is instituted by the federal government. Brazil, which is one of the world’s biggest consumers of wheat, will implement an import quota of 750,000 tonnes, and US companies are trying to find opportunities in the South American country.

Newly-elected President Jair Bolsonaro announced the policy last month during his visit with President Donald Trump. The new import policy will not only impact the US, but also a whole host of producers, including Russia. The US presently sells about 8% of its wheat output to Brazil.

Meanwhile, European farmers are having a difficult time with their crops as dry weather is affecting grains. The UK, Spain, Portugal, and France are all suffering dry conditions – Spain’s rainfall is half of what it typically is. This could give wheat prices some breathing room in the coming weeks.

In other agricultural commodities, May corn futures slipped $0.035, or 0.96%, to $3.5925 per pound. May soybean futures fell $0.095, or 2.07%, to $4.50 a bushel. May orange juice futures cratered $0.02, or 1.91%, to $1.0775 per pound.

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