Wheat is a top-5 crop in the United States in terms of production. Its value is almost $12 billion. This crop is essential to so many things in this country, including the baking industry, which is why prices are so heavily monitored.
Bloomberg reports that the current situation is that an overabundance of wheat produced last year due to favorable weather has caused a surplus for 2017. Global production of this crop continues to rise, with an all-time high of 751.3 million metric tons once the current Southern Hemisphere harvest is complete. This has left a unusually significant stockpile at 252.1 million tons, according to USDA data.
As a result, wheat prices have dropped to a ten-year low of $4.08 a bushel, after a 13 percent drop last year.
To combat the losses, many farmers are planting less wheat this year and focusing on other crops. What that will mean for the surplus and for the market remains to be seen, but JPMorgan Chase & Co. predicts a stockpile drop this year of 8.4 percent.
The rising surplus may be curtailed in the next few months by weather conditions. Many areas of the country have seen below average precipitation since October, with that continuing in certain areas where wheat is a primary crop.