The Road Ahead

I expect that world productions of wheat are expected to decrease due to shift in supply curve. Russia and U.S.A, main producer of wheat, suffered from severe drought condition, leading to higher price. Also, again Russia’s restriction on exportable wheat will affect the price. In addition to Russia and U.S.A, UK wheat farmers are worried about this winter harvest due to bad weather. In time of harvest, it rained over the weekends and is expected to rain following week. All affects to shrink supply curve in wheat.

As well, when we look at stock, the current wheat stock reduces by 2% from USDA report. It causes price increasing. It is enough alarm to get traders’ attention and to increase demand of wheat. Traders will store more today for future. It means that less available now, so price is expected to increase.

Also from 2^nd assignment of FRE 501, we found that corn and wheat have high correlation because they are substitutes. Regarding Corn market, U.S corn prices is increasing by 50% compared to the price before severe drought came along.  China, largest corn consumer, reduced its import form U.S due to high costs. And China’s domestic output growth is not efficient due to bad weather. USDA expects that consumption in wheat reduces by 9% this year.  The article says that livestock farmers have been substituting expensive corn with wheat. So I anticipate wheat demand will increase. It is caused by more consumers choosing wheat instead of corn.

In the end, I expect the wheat price is going up due to increasing demand and decreasing supply.

http://www.agrimoney.com/news/rains-return-forces-growers-to-mull-ditching-crop–5038.html

http://usda01.library.cornell.edu/usda/current/GraiStoc/GraiStoc-09-28-2012.txt

http://www.brecorder.com/agriculture-a-allied/183/1242536/