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But bad weather in major wheat producing regions ? heavy rain in Saskatchewan, severe hot and dry weather in Russia and Kazakhstan ? has stirred buying interest among investors.

LASZLO BALOGH/REUTERS

Adverse weather in Canada, Europe and Russia has pushed the price of wheat sharply higher in the past week, as the once high-flying commodity rallies from recent depressed lows.

Like crude oil and other commodities in 2008, the price of wheat spiked to extremely high levels during the months before the credit crisis hit. Since then, beyond short rallies, the price of wheat has plunged as supply has risen.

But bad weather in major wheat producing regions - heavy rain in Saskatchewan, severe hot and dry weather in Russia and Kazakhstan - has stirred buying interest among investors. The latest surge has also been amplified by investors who had bet wheat prices would keep falling but who are now buying futures contracts to cover their short bets.

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On Wednesday, wheat prices jumped 23 cents (U.S.), or 4.5 per cent, to $5.304 a bushel on the Chicago Board of Trade, based on September futures contract, the most actively traded. It was the fifth successive gain in trading - an overall increase of about 16 per cent - marking the longest rally since last November.

"The wheat market could very much comfortably go back to the high $5, low $6 area, that's a real possibility," said Rich Feltes, senior vice-president of MF Global Research in Chicago.

In June, the price was a multiyear low of $4.45 a bushel.



A lot will depend how your crop does up there. It's been a terrible start, and you need great weather. Rich Feltes, MF Global Research


The future of this season's crop in Canada - the world No 2 exporter behind the U.S. - is an important factor for the price.

"A lot will depend how your crop does up there," Mr. Feltes said. "It's been a terrible start, and you need great weather."

Wheat prices in February, 2008, exceeded $10 a bushel, sent spiraling higher by low global wheat stocks and increased interest among investors. The spike, like that in oil, has been blamed by some commentators on pure speculation and a financial regulation reform bill now being finalized by the U.S. Congress includes curbs on how many futures contracts investors can hold,

It's an attempt to quell unwarranted speculation, but Mr. Feltes said it is unnecessary and could be harmful.

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Since the peak - when global wheat stocks sat at a two-decade low of 123 million tonnes - the price has steadily declined as the amount of wheat has risen. In June, the U.S. Department of Agriculture pegged the level at 194 million tonnes, which many traders expect will be reduced in the July report set for Friday. Mr. Feltes expects a new number of around 180 million tonnes.

IKAR, a Russian research agency, on Wednesday cut its estimate of production for Russia, the world's No. 3 exporter, by 3.5 per cent from a late-June forecast because of the hot and dry weather.

So the market focus turns to the U.S. government update on Friday.

"It will be important to get an understanding of what USDA's view is on the global wheat situation and where they peg Western Europe, Black Sea and Canadian wheat crops," said strategist Luke Mathews of Commonwealth Bank of Australia, according to a report by Reuters.

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About the Author
National correspondent, Vancouver bureau

David Ebner is a national correspondent based in Vancouver. He joined The Globe and Mail in 2000 and worked in Toronto and Calgary before moving to Vancouver in 2008. He has reported on a wide range of stories – business, politics, arts, crime – and has covered sports since 2012. More

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