(Wall Street Journal) – Wheat prices posted their first weekly gain after six weeks of losses, as hopes for better demand overseas for the U.S. grain buoyed the market.
Prices had been sliding as a stronger dollar made U.S. wheat more expensive compared with grain from other regions. The WSJ Dollar Index, which tracks the dollar against a basket of currencies, rose 4% from Dec. 19 to Jan. 30.
But after the March wheat contract fell to $4.9275 a bushel, a nearly four-month low, optimism grew among traders that the U.S. could see a revival in demand from foreign buyers, who have neglected American supplies in favor of wheat from the Black Sea region and the European Union.
The lower prices prompted a string of offers from importers to buy wheat last week, analysts said.
“Even though U.S. prospects for capturing that business weren’t very strong, prices had reached a level where we were attracting more attention,” said Shawn McCambridge, senior grains analyst at brokerage Jefferies in Chicago.
While the offers came from countries such as Iraq and Jordan, where the U.S. is at a geographic disadvantage compared with other major exporters, they nonetheless made for “a lot of nervous shorts in the market, given how far we’ve been walking wheat [prices] down,” Mr. McCambridge said.
Speculation that Egypt, the world’s largest wheat buyer, could seek to buy U.S. supplies supported prices, adding to the wave of short-covering by investors such as hedge-fund managers who recently had boosted bearish bets in the wheat market.
A short-lived easing in the U.S. dollar and concerns about the condition of some U.S. crops also buoyed prices.
March-dated wheat futures rose 5% last week to $5.27 a bushel at the Chicago Board of Trade.
Still, analysts said even a handful of cargoes sold to Egypt wouldn’t dramatically improve the U.S. export picture. The amount of wheat shipped by the U.S. in 2014 fell nearly 23%, according to the data from the U.S. Department of Agriculture.
The USDA is scheduled to release its monthly agricultural supply and demand estimates on Tuesday. A Wall Street Journal survey of 20 analysts reflects a view that the USDA could trim its forecast for U.S. wheat stockpiles as of May 31, the end of the season, to 685 million bushels, from 687 million bushels in its January report.
More important to the market is crop conditions. Crop ratings in major wheat-producing states such as Oklahoma and Kansas have declined, indicating dry weather may have stressed the crop. Still, it is difficult to assess the state of the crop while plants are still in their dormant winter phase.
“It’s like going outside after a snowstorm to assess the health of the lawn,” Mr. McCambridge said. “We’ll have to wait to see what spring brings.”
