Freezing Conditions in the Midwest Drive Wheat Gains

Freezing temperatures in the Midwest have pushed Chicago wheat to large gains
Freezing temperatures in the Midwest have pushed Chicago wheat to large gains

According to a recent Reuters article, Chicago wheat sprung to its highest total in almost two weeks on January 6, marking its biggest two-day gain since mid-October as freezing conditions spread across much of the Midwest.

Most Midwestern states have recently been gripped by the lowest temperatures in nearly two-decades, putting dormant hard red winter wheat crops at risk of damage. Luke Mathews, commodities strategist at Commonwealth Bank of Australia, said in the Reuters article, "There are concerns regarding cold temperatures in the United States. Freezing weather is supporting the sentiment.”

The Chicago Board of Trade proved supported these predictions as March wheat had risen 0.5% to $6.08-1/2 a bushel, just below the session peak of $6.10-1/2 a bushel, the highest total since December 24. The extremely cold conditions are expected to ease towards the end of the week, but damage could have already been done as most fields do not currently have enough snow coverage to protect the crop.

Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, added in a Bloomberg article, “It is as yet unclear how severely the still-dormant wheat plants will be damaged by the extreme cold weather in the U.S. In the southern Great Plains and the Midwest, plants could suffer because there is not sufficient snow cover everywhere to protect them.”

The heart of the world’s top exporter of wheat has been under the burden of extreme cold temperatures that could damage the crop and as a result, prices have risen to high levels, according to the Reuters article.