Wheat traders are the most bearish since at least November as the outlook improves for supplies to increase after world stockpiles fall to a four-year low.
Twelve analysts surveyed by Bloomberg expect prices to retreat next week and eight predicted gains. Four were neutral, making the proportion of bears the highest since the survey began on Nov. 16. Hedge funds have been betting on declines since December and are approaching their most bearish stance since May, U.S. Commodity Futures Trading Commission data show.
The U.S. Department of Agriculture raised its estimate for global stockpiles today by less than analysts in a separate Bloomberg survey had expected. That followed a United Nations’ forecast yesterday for the next harvest to rebound from the previous year. Prices are falling after drought from the U.S. to Europe sent wheat to the highest in almost four years in July and fueled the biggest increase in 2012 among 24 commodities in the Standard & Poor’s GSCI gauge. Futures entered a bear market last month as prospects for crops improved and speculation grew that last year’s price gain would spur farmers to plant more.
“Almost everything around the world is looking good for new crop supplies,” said Chris Gadd, an analyst at Macquarie Group Ltd. in London. “There’s no reason that the world’s consumers need to be aggressively stockpiling at the present.”
Wheat fell 2.3 percent to $7.6025 a bushel on the Chicago Board of Trade this year, after climbing 19 percent in 2012. Wheat slid 21 percent from July to Jan. 10. The drop this year compares with a 4.9 percent gain in the S&P GSCI and 4.6 percent for the MSCI All-Country World Index of equities. Treasuries lost 0.8 percent, a Bank of America Corp. index shows.
World wheat reserves will total 176.73 million metric tons on June 1, up from the USDA’s forecast last month of 176.64 million tons. The average estimate of 16 analysts surveyed by Bloomberg was for stockpiles to be at 177.01 million tons. The USDA outlook would still be down 10 percent from the 2011-12 inventories and the lowest total since 2008-09.
Stockpiles in the U.S., the top exporter, will be 691 million bushels before the 2013 harvest, compared with the USDA’s January forecast of 716 million, the agency said today.
Countries purchased 22 percent less from the U.S. in four weeks through Jan. 31 compared with a year earlier, the USDA said yesterday. U.S. farmers probably planted 41.8 million acres of winter wheat, up from 41.3 million a year earlier, the agency said Jan. 11. While winter crops in the U.S. were in the worst condition since 1985 as they went into dormancy in November, fields were in better shape in the Midwest area that produces the soft, red variety traded in Chicago, data show.
There are signs of a growing supply also in Europe. Early prospects indicate a bigger harvest this year, with the European Union’s winter-wheat area rising an estimated 4 percent to 5 percent, the UN’s Food & Agriculture Organization said yesterday. Russia, the third-biggest shipper in 2011-12, is targeting a 34 percent increase in the grain harvest that starts July 1, Agriculture Minister Nikolai Fedorov told reporters after a government meeting in Moscow on Jan. 31.
Russia will consider abolishing a 5 percent grain import duty, Fedorov said. Russia’s wheat crop plunged 33 percent to a nine-year low in the 2012-13 season after drought curbed production, USDA data show.
Wheat reached $9.4725 on July 23, the highest since August 2008. The U.S. needs more than average rainfall to end the worst drought since the 1930s, and normal to below-normal rainfall is forecast this season, John Nielsen-Gammon, a state climatologist and a professor at Texas A&M University, said this week in an interview in Tampa, Florida.
As of Feb. 5, the U.S. Drought Monitor classified 92 percent of a six-state Great Plains region with soil-moisture levels below 20 percent of normal, including some at zero, with water shortages and crop damage likely.
“The risks to 2013-14 production are still high given the on-going drought conditions in the U.S,” said Erin FitzPatrick, an analyst at Rabobank International in London. “If we do get slightly bearish numbers from the USDA it could continue to push prices lower in the short run, but we think this will open up a buying opportunity.”
Any improvement in consumption may boost demand for U.S. supplies. Wheat on the CBOT is about $1.18 a bushel cheaper than the grain on NYSE Liffe in Paris, compared with a premium of about 71 cents a bushel in July, according to data compiled by Bloomberg.
Speculators have been wagering on a price drop for seven weeks. While they pared the net-short position by 15 percent to 17,676 contracts in the week to Jan. 29, it was down from the largest bearish bet since May 15, CFTC data show.
As wheat declines, swings in the prices have eased. The 100-day historical volatility fell to 21.1 percent today, from as much as 40.1 percent in August, according to data compiled by Bloomberg. The measure is at the lowest since February 2006. That compares with a drop from 30 percent for the S&P GSCI in October 2009 to 13.9 percent now. Winter wheat crops in the Northern Hemisphere are dormant before harvests start in the spring.
In other commodities, 11 of 26 people surveyed anticipate higher corn prices next week and 10 said the grain will drop, while 14 of 27 said soybeans will increase and eight expect a retreat. Corn rose 1.9 percent to $7.1125 a bushel this year in Chicago as soybeans gained 4.6 percent to $14.745 a bushel.
Nine of the traders and analysts surveyed expect raw sugar to slide next week and four predicted a gain. The commodity fell 7.2 percent to 18.11 cents a pound on ICE Futures U.S. in New York this year.
Ten of those surveyed said copper will drop next week, six predicted a gain and five were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, added 4.4 percent to $8,278.50 a ton this year.
Eleven of 31 surveyed said gold would advance next week and the same number were bearish. Bullion fell 0.5 percent to $1,667.45 an ounce in London this year, after advancing the previous 12 years, the longest run of gains in at least nine decades. Investors own 2,615.4 tons through exchange-traded products, 0.7 percent below the Dec. 20 record, data compiled by Bloomberg show.
The S&P GSCI gauge of raw materials slipped 0.2 percent this week after reaching a four-month high on Feb. 1. Economic growth in China, the biggest user of commodities from copper to soybeans, accelerated for the first time in two years in the fourth quarter, while the Federal Reserve has signaled it will maintain its stimulus program to sustain a recovery. The International Monetary Fund predicts global growth will climb to 3.5 percent this year from 3.2 percent in 2012.
“Expectations for higher growth, particularly in the U.S. and China, has driven commodities, especially those dependent on growth,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “Investors seem more optimistic about the return of growth.”
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