Wheat is an important agricultural commodity consumed by billions of people around the world every day. It is used in the making of bread and other food products. As the world’s population has risen, the demand for wheat has risen as well. The biggest producers of wheat are China, India, Russia, and the United States. On the other hand, the biggest importers of wheat are Egypt, Indonesia, and Algeria respectively. This year, the price of wheat has gained by more than 20% as the supplies abate. In the past three months however, the price has gone down by almost 10 percent.
Wheat is a cyclical commodity. This means that when the price rises, producers rush to plant more so that they can profit from the increased price. This was likely the reason why the price has started to fall.
Last week, the Department of Agriculture released the WASDE report. This is a monthly report that tries to estimate the demand and supply of key agricultural commodities. In the report, the department said that the world was likely to see increased supplies, reduced demand, unchanged exports, and higher stocks. Wheat production also climbed to 7 million bushels. However, from a global perspective, the report reduced the forecast of the supplies, because of low production in Australia and Russia. The report said:
Australia’s production is decreased 1.5 million tons to 18.5 million on continued dry conditions and possible frost damage. This would be Australia’s smallest production since 2007/08. Russia’s wheat production is reduced 1.0 million tons to 70.0 million on lower-than-expected yields in some spring wheat areas
As a result of the data, the price of wheat jumped from $507 to $525. There is a likelihood that the price will continue moving up as global supplies reduce.