Adverse global weather creates potent bull market for wheat

Adverse global weather creates potent bull market for wheat
Adverse weather around the globe, such as the recent devastating floods in Germany, is putting pressure on global wheat supplies. Photo: Pixabay
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The agriculture sector in Europe is frantically assessing the damage to crops following the recent devastating floods that wreaked havoc in Germany, the Netherlands and Belgium, in particular.

At the same time, some futures exchanges in the US saw the largest gains in wheat prices in six years during the week ending 17 July.

According to market analysts, world weather was creating a potent bull market in the wheat sector, with investors expressing serious concern about the constraints on supply and demand, especially in high protein wheat grades.

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The failure of winter wheat crops in the Pacific North West had been widely reported, but now heatwaves were decimating the Canadian crop, and there was concern about the US spring wheat crop, according to Reuters.

The US Department of Agriculture downgraded the spring red wheat production outlook by 42% compared to volumes realised in 2020.

Weather-related production woes were also evident elsewhere in the world, with wheat producers in central Asia, including Iran and Kazakhstan, both significant wheat production countries, suffering droughts that were likely to result in smaller crops this year, the Reuters report said.

According to harvest analyst Malcolm Bartholomaeus of Bartholomaeus Consulting in Germany, there were likely to be issues with the transportation of existing grain stocks, due to flooding in German river ports.

Bartholomaeus told Reuters that crop woes were impacting regions with traditionally high protein grain, which meant that a large spread could emerge between high and low protein wheat grades.

In Canada, a recent crop report on the important wheat growing province of Saskatchewan indicated that an ongoing heatwave was taking its toll on the upcoming harvest.

Sustained heat, combined with hot winds and negligible rainfall has sent crops into a near terminal decline, the report said.

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