Wheat and coffee prices grind to new low

Alex Breitinger
For USA TODAY-Wisconsin

After climbing to seven-month highs earlier this month, wheat prices have crumbled by nearly 10 percent. The market had exploded higher on drought concerns in the Great Plains, where much of the American wheat crop is grown.

Unfortunately for U.S. farmers, our foreign competitors aren’t suffering from similar issues. Global wheat production is expected to rise by more than 5 percent this year, which will allow countries like Australia, Canada and Russia to sell their crops at cheaper prices than U.S. farmers. Low-cost foreign wheat is an issue for American farmers, as they depend on exporting nearly 40 percent of their crop each year.

Despite the recent drop in prices, U.S. wheat is still expensive. May futures for Chicago soft red wheat, primarily used for pastries, was worth $4.72 per bushel, while Kansas City hard red wheat, typically used to bake breads, was valued at $5.06 per bushel.
These prices should allow many U.S. farmers to still turn a profit this year, but only if their winter crop survived the blast of frigid temperatures earlier this winter and is able to handle dry springtime conditions.

Coffee grinds to new low
Caffeine addicts should rejoice this week to hear that coffee prices are nearing the cheapest level in almost two years. The market has been dripping lower for the past three months and traded Friday under $1.17 per pound.

Coffee is grown in nearly 70 equatorial countries around the world, but Brazil is the source of nearly one-third of the global supply. Production there is booming, and the Brazilian government is projecting a record-breaking crop this year.

Brazilian farmers are partially protected against the price drop as their currency, the Brazilian real, has been falling recently compared to the U.S. dollar. This results in the Brazilian farmers still receiving nearly the same payments in their local currency, which stimulates more selling on their part.

Without a supply threat or sudden new demand, it may be hard to entice investors to perk up and buy the beans, unless the price falls to a bargain level.

Alex Breitinger of Breitinger & Sons LLC, a commodity futures brokerage firm, can be reached at 800-411-3888 or indianafutures.com.