The undervalued winter wheat futures

No doubt about it, Kansas wheat futures are one of the most undervalued commodities heading into 2020.

For three months, Kansas wheat futures traded in a very slow, tedious upward trend comprised of a mere 30-cent trading range. For comparison, the big money funds were playing their hand at buying Chicago wheat futures, which rallied 80 cents in that same time frame. The price of Kansas wheat futures is trading at an 80-cent discount to Chicago wheat futures.

For a crop price that has been beaten down by global wheat surplus, times are changing. Global supply is trending lower; a smaller crop in Australia due to drought, and smaller crops are also being reported in Great Britain, Germany and Ukraine. As you likely already know, here in the United States the slow pace of the U.S. corn and soybean harvest this fall likely limited the number of winter wheat acres that got planted (to be harvested in 2020). According to the most recent U.S. Department of Agriculture data, U.S. farmers planted 45.2 million acres of wheat overall for 2019, the fewest in USDA records dating to 1919.

Overall demand for wheat across the globe is improving. The U.S. recently had a weekly wheat export sale come in at 869,000 metric tons, which was the largest weekly number in more than six years. Buyers included the Philippines, Mexico, Thailand, Japan, and “unknown destinations” (which many assume is China).

Coming back from the New Year, many traders may likely be looking for investment opportunities. The world will wake up to the reality that the wheat story overall is becoming quite supportive. When traders see that Chicago wheat futures have already rallied, they may shift their focus instead to the undervalued, “on sale” Kansas City wheat futures.

Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at [email protected].