Weakness in the U. S. stock market has dragged wheat prices lower even as dry weather throughout the U. S. Plains this winter has threatened to severely damage this year’s crop.
“I think that the stock market really does have a death grip not only on wheat, but a lot of the commodities,” said Joe Victor, analyst with Allendale Inc.
But the state of the crop could become a market factor as the crop develops and traders are better able to assess the damage, if any.
The United States is the world’s largest wheat exporter, and crop conditions could limit further declines in the market but are unlikely to spark a rally.
Forecasts for more dry weather in key wheat-producing areas of the United States this week have failed to dispel the wheat market’s bearish tone.
Traders were focused on bad news about the economy, including a U. S. jobs report that showed the unemployment rate hitting its highest level since December 1983.
“There is not a dominant fundamental feature in the market at this time, which causes it to look elsewhere for direction,” Prudential Bache analyst Shawn McCambridge said.
Global economic weakness could cut into total usage of wheat this year so the threat of crop-wasting dryness was not yet much of a concern, a trader said. The crop could lose some bushels and there would likely be enough supplies to meet demand even with the poor conditions, a wheat trader said.
Wheat prices fell sharply in February even as crop conditions deteriorated.
The benchmark Chicago Board of Trade nearby wheat futures contract fell nearly 12 per cent to $5.10-1/2 a bushel during the month.