Global market trends can represent a tricky path to navigate – especially with wheat, which is grown, imported and exported across the globe in massive quantities. Dozens of factors are at play, and always shifting.
Which of them are worth paying attention to, then? Cordon Sroka, a broker with Allendale, Inc., is looking at five in particular that could affect wheat prices in 2016.
1. Winterkill. “Obviously, it’s always a concern,” Sroka admits. But the lack of snow cover across some areas of the Midwest and Great Plains has some experts skittish, he says. The upside – meteorological winter is already more than half over, so the odds of major damage diminish a little each day as spring approaches.
2. Russian Export Restrictions. Russia is once again considering tougher grain export limits. Exports were at a record high in December because of a weaker rouble. If Russia imposes these restrictions, that could have positive supply/demand implications for other wheat exporters.
3. Argentine Peso Valuation. “We could see Argentina come back to the export market a little more aggressively,” Sroka says. That could hurt U.S. prospects, he says. President Mauricio Macri eliminated most crop taxes and lifted currency controls in December, causing a 30% currency devaluation. In the three weeks that followed, the country exported $2 billion worth of crops.
4. Interest Rates. Although the Federal Reserve declined to raise interest rates in January, Sroka predicts they will do so once per quarter in 2016 for four total interest rate hikes. AgWeb reported in December that research indicates that for every 1% in higher interest rates, commodity prices could slip by 6%.
5. General Commodity Sentiment.
The bottom line is, farmers should keep a watchful eye on the markets, especially in February and March, when opportunities due to these factors could present themselves, Sroka says. He isn’t ruling out July ’16 contracts to get back over $5.00 and September ’16 contracts to reach $5.50.
“There will be rallies, and you’ll want to take advantage of them,” he says.
Sroka presented at Allendale’s Ag Leaders Conference, which also covered timely topics around corn, cattle, soybeans, wheat and more. For more information or to listen to the recordings, go to http://www.allendale-inc.com/2016-ag-leaders-conference-series-recordings/.