(Wall Street Journal) – Wheat prices are climbing on expectations that overseas demand for U.S. grain will be robust this year.
Wheat for March delivery rose to $5.985 a bushel Friday on the Chicago Board of Trade, a five-week high. Trading was closed Monday due to the Presidents Day holiday.
The gains in wheat prices were spurred by a government report on Feb. 10 that raised its forecast for U.S. exports by 4.4% from its previous estimate.
Overseas buyers have been clamoring for U.S. wheat after the price fell 22% last year. Wheat exports are already up a third from last year, to 21.6 million metric tons, according to government data.
The higher demand is also expected to shrink U.S. stockpiles of the grain.
The U.S. Department of Agriculture lowered its forecast for the amount of wheat left at the end of May to 558 million bushels, down 8.2% from its previous projection.
“The export pace has been stronger than we thought,” said Don Roose, president of risk-management firm U.S. Commodities Inc. in West Des Moines, Iowa.
What could rein in export sales are higher prices for U.S. wheat, analysts said. Globally, wheat stockpiles are adequate, so even a slight price increase could turn buyers of wheat away from the U.S. and toward its competitors, such as Ukraine or Russia, said Darrell Holaday, president of brokerage firm Advanced Market Concepts in Wamego, Kan.
Still, the signs of demand for U.S. wheat and the potential for weather-related crop losses have helped prices recover from a 3½-year low that was reached on Jan. 29.
“We have some weather doing some damage in the southern Plains with that Arctic blast,” said Al Kluis, president of Kluis Publishing and a commodity trading adviser in Wayzata, Minn.
Some winter varieties that were planted in the fall and are set for harvest in May and June have been subjected to below-freezing weather for several days at a time, which could lead to plant death, a condition known as winterkill.
Winter wheat production, after the harvest this year, is projected to be 2.22 billion bushels, the USDA said in a report on Thursday.
While that number is a preliminary estimate, it may be lower if winterkill cuts yields in parts of Kansas, the biggest U.S. grower of wheat, said Dennis DeLaughter, a Houston-based analyst at commodity brokerage Vantage RM, who recently drove through Kansas inspecting wheat fields.
“People are coming to the realization that there’s more damage than they thought,” Mr. DeLaughter said. “The wheat really looked like it was under a tremendous amount of stress. It looks like there’s a lot of damage.”
