“The world can source wheat from the northern hemisphere or southern, eastern or western. That increases the food security of the world a whole heck of a lot,” Ken Stein, co-manager of Kottke Commodity Capital, told the Financial Times.
Some may believe that the increased production may help diminish prices for end consumers, which may create more demand. However, Abdolreza Abbassian, grains economist at the UN Food and Agriculture Organization, argued that demand only tends to track population growth. Wheat production is expected to outpace consumption by 10 million tons this year.
However, some observers warn that the supply of high-quality wheat are less than people expect, which may open the wheat market for a potential rebound.
“While total supply gets the most attention, wheat’s real value is as a functional food ingredient, not as a bulk commodity,” US Wheat Associates said in a note. “When you dig a bit deeper, the total supply of milling quality wheat is much different — and it is tightening.”
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Moreover, after the recent sell-off, WEAT is showing a relative strength of 22.05, which suggests that the market is oversold – the relative strength index measures the speed and and change of price movements, with readings below 30 signaling an oversold market.
For more information on the agricultural market, visit our agriculture category.
Teucrium Wheat Fund