Bearish Signs Aplenty For Wheat, Yet Prices Could Bounce - CBA

There are plenty of bearish signs for international wheat prices and little that’s bullish, yet prices are still susceptible to a short-term bounce, according to an analysis issued Friday by Commonwealth Bank of Australia (CBA.AU).

World stocks seem to be growing, while growers seem happy to accept the lowest price and there is no shortage of sellers, so “prices can still fall further in the near term,” Luke Mathews, a commodity strategist at the bank, said in a note.

He highlighted a pullback in domestic U.S. wheat consumption estimates by the U.S. Department of Agriculture this week added to an already bleak export demand profile, resulting in another upward revision to U.S. stocks.

Compounding this was an upward revision to global supplies, driven by a bigger Argentine crop and more wheat in Russia. Hefty supplies in these countries isn’t good news for Australian producers, as all of these countries are exporters, he said.

News that India may begin to export wheat doesn’t enhance the picture either, he added.

Moreover, weather-related issues are always a possibility. While it’s too cold and wet in parts of Europe and the U.S., no serious issues have emerged just yet, he said.

Source: CME Group