The wheat market started the week after the Fourth of July holiday with a strong rally as traders responded to weather concerns in Europe. Although prices have since given back some of those gains, uncertainty surrounding overseas production continues to lend support to the market. While wheat is not a major crop in Iowa, changes in wheat prices can still influence corn markets as traders often move money across multiple grain commodities.
Oklahoma State University assistant professor of crop marketing Todd Hubbs said the recent stretch of hot weather across Europe appears to have reduced yields in some areas, although the full impact of the heat is still being determined.
Hubbs said some of the market’s recent rally may be driven by weather speculation, but there are legitimate concerns about portions of the European crop. At the same time, strong production and exports from the Black Sea region continue to provide stiff competition and limit the upside potential for wheat prices.
Even if European wheat production falls short of expectations, Hubbs said it will be difficult for U.S. exporters to capture much of that lost demand. Shipping costs and geography continue to favor suppliers located closer to many of the world’s largest wheat-importing countries.
Hubbs said the United States remains well-positioned with many of its traditional wheat customers, particularly throughout the Western Hemisphere. However, unless crop losses in Europe become significantly worse, he expects global competition to keep wheat prices from making a sustained move sharply higher.
