Farmers forced to ditch wheat

Wheat is the weed that feeds. The grain-yielding grass is such a hearty plant that it is grown on more land than any other crop in the world.

After four straight seasons of record harvests, bins are bulging from Kansas to western Australia and prices are near the lowest in a decade.

But there are signs the glut may not last much longer - or at least that supplies may tighten enough to halt the four-year slump in wheat futures. Farmers are planting less because many are losing money.

At the same time, global consumption is at an all-time high. And the risk of crop-damaging weather lingers over key exporting countries this year.

'It's difficult to be overly bullish,” said Benjamin Bodart, a director at adviser CRM AgriCommodities in Newmarket, England. 'The world is still awash with wheat. You cannot deny it. But when you dig a bit further, the downside now is fairly limited.”

While many money managers remain bearish - they've bet on lower prices for 17 months straight - wheat is expected to gain in 2017 for the first time in five years, according to a Bloomberg survey of 13 analysts. Rabobank says there is a 'real possibility” of a supply shock in the United States and Europe if farmers shift to more profitable crops, and JPMorgan Chase predicts a stockpile drop this year of 8.4 percent.

It's not difficult to see why the market slumped for so long. Wheat used in everything from bread to cakes and noodles thrives in all sorts of climates, and every few months there are crops being harvested somewhere in the world. Global production will reach an all-time high of 751.3 million metric tons once the current Southern Hemisphere harvest is complete, leaving stockpiles at 252.1 million tons, the most ever, U.S. Department of Agriculture data show.

'For prices to move substantially higher from here, we need to see some signs of supply being restricted, either by a weather event or by the fact that production levels are curtailed,” said Fiona Boal, director of commodity research at London-based Fulcrum Asset Management, which oversees about $5.2 billion.

In the United States, the No. 2 exporter, growers probably seeded the fewest acres of winter wheat in at least 104 years, according to the average estimate of 25 analysts surveyed by Bloomberg before a Jan. 12 USDA report. Winter wheat, the most-common variety grown in the country, is sown in the fall, goes dormant during the coldest months of the year, and is harvested in the spring.

Some farmers in Kansas, the largest U.S. producer of winter wheat, could lose money on every bushel, according to data from Kansas State University in Manhattan. The crop cost about $5.04 a bushel to grow in the state's south-central areas, including land and labor expenses. That's below the average national cash price for hard red wheat of $3.38 as of Jan. 6.