South West Farm Press Logo

As of now, nothing expected to have a large effect on wheat prices.

Kim Anderson

December 22, 2020

2 Min Read
swfp-shelley-huguley-kim-anderson-header.jpg

In December, most of the world wheat supply and demand situation is known, which minimizes price shocks and tends to result in lackluster prices. The Southern Hemisphere’s wheat harvest is about over. The next year’s (2021) wheat harvest does not start until March in India, Pakistan, and North Africa, and these crops are not exported. The next exportable wheat to be harvested is U.S. winter wheat followed by Black Sea wheat in late July.

In December, the market often turns to “new” wheat crop (2021) conditions and potential production. The winter wheat crops in the Northern Hemisphere will not come out of dormancy until late February or March.

Crop conditions have been determined. Elements market analysts tend to watch are weather, precipitation, and temperature. Weather that will have the largest impact on wheat is a hard freeze in dry conditions. Hard freezes in dry conditions are more likely in January and February rather than December.

Market factors that could provide shocks to the wheat market are changing positions by technical traders and Chinese wheat imports. At this writing, Managed money traders’ future contract positions for soft red winter wheat are net short (sold) 9,733 contracts. While not neutral, 9,733 net short contracts out of 73,566 contracts implies a slightly negative price outlook.

Managed money traders for KC (hard red winter) wheat contracts are net long with 44,872 contracts. Total Managed money KC wheat contact holdings are 73,566, which implies a positive price outlook for hard red winter wheat prices. However, it also implies a risk of substantially lower prices. Selling 44,872 contacts to get to an even position could negatively impact wheat prices.

For the Managed money traders to reverse positions would take a change in the market price expectations (new information), which is not likely to happen in December.

Another shock to the market could be provided by China. While it is not likely, when have market analysts had the ability to predict what China will do?

During December, some farmers will sell wheat to generate Christmas money or to fulfil marketing plans. Buyers will buy wheat to meet normal needs.

Some days, buyers’ needs will exceed wheat sells, and wheat prices will rally more than usual. Other days, wheat sells will exceed wheat needs, and prices will decline more than usual. Ultimately, it all tends to even out.

Overall, world wheat stocks are plentiful. But, milling quality bread flour wheat is marginally short. January 1 will arrive with new information, new plans for the calendar year, and unpredictable weather around the world.

At this writing, nothing is expected that would have a big impact on wheat prices. So, expect a lackluster December.

Merry Christmas: Kim

About the Author(s)

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like