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Global drought concerns catch attention of wheat market

A market analyst says lower world wheat stocks are starting to catch the attention of the grain markets.

Mike Zuzolo with Global Commodity Analytics and Consulting says there’s drought in top wheat growing countries like the United States, Australia and the Black Sea region. Russia and Ukraine are expected to set a minimum price for wheat exports so prices don’t fall below a certain threshold.

“The trade is maybe waking up to the idea the supply of available wheat for exports coming out of the Black Sea isn’t going to be as big as it’s been the last two to three years.”

Zuzolo says drought lowers wheat quality, which means the crops produced might not be favored for baking, but used for feed and compete globally with corn production.

He says the wheat market in the U.S. has been in a pattern of moving one step forward, two steps back due to currency value changes and that might not change until the New Year.

“Shortly before or after that January WASDE report, when the final numbers come in.”

But Zuzolo says if the value of the U.S. dollar remains tame, there’s a chance U.S. wheat prices will return to a more seasonal pattern and attract more global business January through March.

“What the wheat market sorely needs to change the demand dynamics is for Middle Eastern countries to start buying wheat. That would be our best indication the Black Sea is indeed tightening up on exportable supplies.”

The U.S. wheat markets have been trending lower at the end of October and start of November.

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