CHICAGO (Reuters) - The threat of severe flooding in the upper reaches of the United States cutting spring wheat plantings by 500,000 acres will be overwhelmed by plentiful global supplies that will keep the pressure on prices.
The Red River Valley, a top spring wheat growing area stretching from western Minnesota to eastern North Dakota and north into Manitoba, Canada, is bracing for flooding as the Red River rose to its highest level in 112 years.
“Wheat is a world production,” said Shawn McCambridge, grain market analyst with Prudential Bache Commodities. “There are a lot of places that grow wheat. You have to have (problems in) more than one region to really affect the balance sheet. There is a good production elsewhere.”
The benchmark Chicago Board of Trade hard red winter wheat futures contract has fallen about 8 percent this week. Minneapolis Grain Exchange’s nearby spring wheat contract was down 5 percent for the week.
Wheat prices continued to fall on Friday even as residents in Fargo, North Dakota, were forced to evacuate their homes. The river is expected to crest by Saturday at 42 feet.
Storms around the U.S. Plains region would likely boost prospects for the total wheat crop by improving conditions for the hard red winter wheat crop. Winter wheat accounts for about three-fourths of total U.S. wheat production and has suffered from dry conditions during the past few months.
“Any wheat they lose in the spring wheat belt they are going to more than make up in the hard red winter wheat belt,” said Vic Lespinasse of GrainAnalyst.com. “We grow a lot more wheat in the Southwest that we do up in the northern Plains.”
The rains were coming at a crucial time for the winter wheat crop, most of which has emerged from dormancy during the past few weeks.
Total worldwide wheat production was forecast to fall this year but there were still plenty of supplies leftover from last year’s record crop.
The International Grains Council said earlier this week that world wheat production would fall 5.4 percent to 651 million tons in the 2009/10 crop year. But global carryover stocks were expected to rise 6.9 percent.
Analysts were expecting an upcoming U.S. Agriculture Department report to put U.S. wheat ending stocks at 1.062 billion bushels, up from 709 million bushels in March 2008.
Light demand around the world for U.S. wheat also was allowing traders to shrug off expectations of damage to crop land in key areas of the spring wheat growing region.
“U.S. wheat prices are about the highest in the world,” said Lespinasse of GrainAnalyst.com. “We are not competitively priced. The market has been falling like a stone this week to get U.S. wheat prices in line with the world market.”
A rising dollar this week made U.S. wheat even less attractive to overseas buyers. The economic recession was making buyers in most countries more sensitive to prices.
More and more buyers were turning to cheaper offerings from countries in the Black Sea region even though wheat from that area was typically lower quality than U.S. supplies.
Reporting by Mark Weinraub