Tight supply creates challenging scenario in the US, says U.S. Wheat analyst

Wheat prices in the United States are expected to remain at high levels due to tight supply. Taking hard red winter wheat as a basis, the most produced in the country, the situation is quite adjusted, as the crop comes from two consecutive years of drought. The rise in prices results in a reduction in demand for the product.

The market analyst at U.S. Wheat Associates, Tyllor Ledford, who gave an exclusive interview to Agência SAFRAS, hopes that next year’s crop will be bigger. For now, the picture remains challenging. Volatility is the biggest risk at the moment. “So we talk to our customers about the importance of risk management,” she said.

The analyst notes that global wheat prices depend on the global macroeconomic scenario, taking into account geopolitical tensions, the climate in the main producing countries, in addition to supply and demand. Currently, however, it is the war in Ukraine that has been determining the movements.

U.S. Wheat Vice President of Communications, Steve Mercer, also participated in the interview and agrees that the issues surrounding the offer are already well set. “My feeling is that When Putin sneezes, the price changes.”

Regarding the tendency for price movements in the United States until the end of the harvest, the analyst, Tyllor Ledford, believes in seasonal supply pressure, but at the same time, many of the international buyers of US wheat are waiting for the end of the field work to make their purchasing decisions.

 “We see many customers holding back purchases until they have more information about the crop and quality characteristics. This is different from previous years, when some booked shipments six months in advance. Now, with the volatility, they wait,” she explained. “For that reason, it is difficult to say how prices will move. It is easier to predict the domestic price, which does not feel so much the effects of global geopolitics”, she pointed out.

Lower foreign demand for US wheat should help preserve US stocks. “When stock-to-consumption ratios start to drop, the market gets uncomfortable. In recent years, we’ve seen demand outpace inventories in the US”, she believes there is still a lot to be known, especially with the spring harvest still in the early stages in the country.

Without the occurrence of extraordinary weather events, the trend is for a seasonal drop in prices in the country. Even so, prices would remain high compared to previous years and to the competitor, Russian wheat.

Tags: Hard Red Winter-wheat, demand, prices, United States, wheat, drought