Why Wheat Prices Might Remain Low

Key Update: Agriculture Commodities Continue to See Prices Fall

(Continued from Prior Part)

Wheat production

China is the largest wheat producer in the world—followed by India and Russia. The US ranks fourth in wheat production. In 2014–2015 the global production of wheat is estimated to be around 726 million metric tons. Of this, the US is expected to produce about 55.13 million metric tons.

Wheat prices

The hard red winter wheat prices rose slightly in May to $5.40 per bushel—compared to $5.36 per bushel in April 2015. The overall yield is expected to rise to 3.28 metric tons per hectare in the 2014–2015 season from 3.25 metric tons per hectare in the 2013–2014 season. The total wheat production is also estimated to rise by 12.4 million metric tons. This will likely keep the prices depressed.

In April 2015, 1.8 million metric tons of wheat were exported. The exports fell 9% from 1.9 million metric tons exported in March 2015.

Wheat farming

Wheat accounts for about 17% of the total acres used to plant principal crops in the US. About 58 million acres were used to plant wheat. Of this, 46 million acres were harvested in 2014—about 92% output.

Lower wheat prices are positive for agriculture feed producers like Archer Daniels (ADM), Bunge (BG), and The Andersons (ANDE). The Market Vectors Agribusiness ETF (MOO) gives you an opportunity to invest in all of the the stocks mentioned above. Currently, the companies form 11% of MOO. Monsanto (MON) is MOO’s largest holding at 8%.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Agricultural Commodities in the US: What Causes Them to Change?

• Part 2 - Corn’s Downward Trend: What Caused Prices to Fall?

• Part 3 - Soybeans: Higher Crop Expectations Send Prices Down