Wheat inventories increase

Anna Lachowiecka from X-Trade Brokers, XTB at 12/04/09

The price of wheat has decreased and currently one bushel is quoted at 5,72 USD after rumors that inventories of the commodity will increase in the next year. This is due to the global tendency of better than expected crops of wheat. Analysts forecast that inventories and local production will exceed demand next year in Pakistan, which is one of the key importers. In this case, external import will not be needed. Globally, good crops and increasing inventories are causing excess supply over demand and this in turn creates pressure towards lower prices.

From the technical analysis point of view, we are still in an upward trend with the support at 5,5096 USD and lower at 5,42 USD per bushel (middle-term trendline). Breaking that suppport level will be a signal for a larger price drop. Resistance level is the peak from the 1st of December at 5,97 USD per bushel.

If the long-term perpsectives will continue to show a surplus of supply over demand, we should observe price declines of wheat on global markets. In the short-term the prices will be affected by the situation on the currency market. A further depreciation of the U.S dollar could stop the declines and help maintain current price levels of wheat.