Market Report Update 3-20-17

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Weekly Market Highlights

  • Spring wheat futures prices are slightly higher this week. Spring wheat stocks are falling, and there are concerns farmers will plant alternative crops this spring.
  • Winter wheat futures and basis premium prices fell steadily for more than a week starting with the USDA projection for a huge crop in Australia. India is also forecast to have a near record harvest, further adding to the world supply of wheat.
  • Wednesday’s market focused more on the dry conditions, even wildfires, in Southern growing areas where drought concerns are mounting. At the end of the day, futures closed higher.
  • Recent softness in wheat markets has been a good opportunity for buyers of flour. There are many concerns that could cause the market to move higher.


Facts on Flour: The Truth About Futures

While even the most experienced traders are, at times, befuddled by the apparent chaos and volatility amid the noise and confusion, the workings of the grain futures markets are actually rather orderly, highly regulated and very important to the efficient function of the grain and milling industry.

Futures satisfy three very critical economic needs;

  1. Price determination in a fair and open marketplace where all participants have equal access.
  2. Allocation of grain supply over the entire crop year.
  3. Risk avoidance for mills and other participants through “hedge” positions that “insure” against decreases in the value of stored grain.
In the absence of futures markets, grain and flour prices would almost certainly be determined less honestly and efficiently. Supply and prices would be less consistent since there would be no way to encourage sellers to defer grain sales to “future” positions during times of surplus, and, grain traders, millers and buyers of flour would shoulder huge risk in owning wheat and flour.

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