Once again, wheat prices are up, and though some mischief-makers might want to blame Bernanke and QE, that’s really not the story.
It’s really about the Russian wheat fires, followed by floods in Australia, floods in Brazil, dought in the US, and now the mother of all cyclones bearing down on Australia.
Here’s Dennis Gartman on Australia:
The people of Australia do not need another storm, but they are about to receive it, and with that storm shall come further massive flooding. The ground there in eastern Australia is already obviously saturated. It can hold no more water. The crops that have not been destroyed in Queensland and New South Wales shall likely be destroyed, and what remains of the winter wheat crop cannot likely be considered lost. Thus we see wheat futures trading properly higher this morning on the CBOT. They will continue higher still.
And it’s not just there.
Moving on then to North America and the winter storm in the central portion of the continent, we can attest to the fact that it is incredibly cold here in San Antonio this morning where the temperatures at this time of the year should rarely drop below 45F at night. It is in the low 20’s as we write. There is even talk… and it is talk only… of “snow in Corpus Christi” along the southern Gulf Coast. Temperatures across much of the central portion of N. America are 20-30 degrees below normal, with wind chills taking temperatures into the deep negative numbers.
There is talk of winter-kill on the hard red winter wheat crop and there is no doubt but that some winter kill shall be seen; however, there has been an excellent and much needed blanket of snow upon a goodly portion of the crop, and that snow blanket shall do much to shield the nascent winter wheat crop from material damage. However, given the inordinately tight conditions for the global wheat market at themoment, even slight winter kill problems shall have an exaggerated effect upon prices.