Wheat Futures Rally Amid War, Drought, and El Niño
The wheat futures market has entered its first bull run in years, driven by a combination of factors including wars overseas and drought conditions in key production regions. The El Niño weather pattern is also contributing to higher prices, with wheat futures rallying an average of 14% during moderate or strong El Niño events.
According to Jim Roemer, principal at Best Weather Inc., the recent heatwave in Europe and the northern Plains has resulted in reductions in wheat crops in France and the Dakotas. Dryness in Australia's west is also affecting production, while a positive Indian Ocean Dipole is lowering yields.
The drought in the Plains last spring and lower acreage are creating a squeeze in the market, with millers and food processors in the United States scrambling for supplies. The US wheat crop is expected to be at its lowest level since the early 1960s.