U.S. wheat futures tumbled again on Thursday amid flagging demand for crops grown in the country.
According to Investing.com, U.S. wheat for March delivery declined by $.0327, or 0.62 percent, to trade at $5.2413 a bushel during U.S. morning trading hours on the Chicago Mercantile Exchange.
This move came after a considerable drop in the previous trading session, where U.S. wheat for March delivery dropped $.07, or 1.31 percent. Bloomberg reported that U.S. wheat futures have fallen 21 percent since December 18, 2014.
"U.S. wheat futures have fallen 21 percent since December 18, 2014."
Egypt seeks wheat priced in weaker currencies
On Wednesday, the Egyptian government canceled a tender to buy U.S. wheat, even after the U.S. extended Egypt a $100 million credit line to buy it. According to Bloomberg, Mamdouh Abdel Fattah, vice chairman of Egypt's state-run General Authority for Supply Commodities said that U.S. wheat prices are too high and that the country will look elsewhere for its supply.
Egypt is the world's largest importer of wheat, but Bloomberg wrote that the country hasn't purchased U.S. wheat through its state-run tender system since last September. Rather, Fattah has begun looking into cheaper European suppliers as a replacement for the more expensive American crops.
"U.S. wheat is really too expensive compared to what Egypt can buy in Europe," Manon Leygue, analyst at ODA U.K., a unit of French farm adviser Offre et Demande Agricole, said in a phone interview with Bloomberg. "French wheat will be easier to buy from Egypt, because in France there is still a big amount to export."
Analysts have pointed out that the strong U.S. dollar is likely pushing the commodity's price down. The U.S. wheat is dollar-denominated, and when the dollar is stronger, it costs more to buy commodities priced in that currency. With the looming possibility of the Federal Reserve raising interest rates this year, it looks like the greenback could be poised for more growth, which could have further impact on commodity prices.
European wheat exporters taking advantage of high U.S. prices, slow Russian exports
Wheat exporters in the European Union are increasing their shipments like due to the fact that the U.S. is, at least temporarily, priced out of the market and that Russia continues to keep its exports low amid fears of a recession and high food price inflation, Bloomberg reported.
European shipments are skyrocketing, a development that analysts have chalked up to the region's low prices in light of a struggling Euro. According to Bloomberg, the EU issued export licenses for 1.67 million tons of wheat in the week through Feb. 3, which was the highest recorded amount since July 2004. The total fell to 626,032 tons in the following week.
In particular, France and Romania have bulked up their export numbers considerably. France has been by far the biggest supplier to Egypt in recent months, having sold 840,000 tons to the country since December. Romania sold 300,000 tons of wheat to Egypt in that time, Bloomberg wrote.
"Buyers are going to be a little bit reluctant to go to the Black Sea region and the U.S. is not really price competitive," Amy Reynolds, a senior economist at the IGC in London, said in a phone interview with Bloomberg. "The EU at the moment is certainly the origin of choice."
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