U.S. wheat prices will rise above $8.50 a bushel this spring and may approach $11 if adverse weather damages the crop in the United States and other top growing nations, said an analyst who was the second closest in predicting prices in a Reuters poll last year.
Worries about snug global supplies of milling wheat after rains damaged Australian crops and after a dry start for the U.S. winter wheat crop will support the market through spring before prices ease in the second half of 2011 as the Northern Hemisphere’s harvest replenishes stocks, said Jack Scoville of the Price Futures Group.
Benchmark wheat futures on the Chicago Board of Trade could then hold within a still-firm $8 to $10 range, he said.
“Originally I thought coming into this year that we’d stay firm but kind of chopping sideways, but with the weather the way it is it’s hard to say that now. The weather is just flaky enough that it’s going to keep production bears on edge,” Scoville said.
“We know that we’ve had big problems over in Europe and now down in Australia, but we’ve got some problems here (in the U.S. Plains) with the potential for freeze,” he said.
“Your first target is going to be about $8.50 or so and if we continue to have weather issues I think we could see the market march higher towards the $11 area. It will take more than just the weather here (in the United States) to get it going that high, but it could happen,” Scoville said.
Wheat has not traded above $9 a bushel since 2008, a year in which the spot month CBOT contract hit an all-time high of $13.34-1/2 per bushel. Spot wheat futures have not traded above $11 since March 2008.
Unexpected second-half surge
Wheat’s strong rally in 2010 was not foreseen by the analyst community last January as abundant global supplies at that time and a fading U.S. export pace had dragged prices lower for two consecutive years.
Spot CBOT wheat futures settled at $7.94-1/4 per bushel on December 31, 2010, up 46.7 per cent in the year and the largest annual increase since 2007.
Scoville of the Price Futures Group came in second in the poll to Joe Victor, who has since left brokerage Allendale Inc. to join the Minneapolis Grain Exchange. Victor declined to predict 2011 prices for Chicago Board of Trade wheat futures.
Former Allendale Inc. analyst Joe Victor, now a business development specialist at the Minneapolis Grain Exchange, topped all forecasts with his $5.90-a-bushel outlook for the year-end wheat price.
Scoville’s $5.75 forecast was the next highest of the 14 projections, eight of which anticipated wheat prices to close lower than the $5.42 settlement on December 31, 2009. The average trade estimate was $5.27 per bushel.