The scenario of a price surge doesn’t look likely. Lower output in countries hit by bad weather may be outweighed by production in such countries as the US, Canada and Australia. Even in countries like Russia and European Union, where crops were harmed by weather, improving weather boosts prospect for winter wheat. Global inventories of wheat also remain plentiful, making possibility of a deficit very low.

Global output is expected to total from 643 million metric tons to 644 million. Global inventories are predicted to reach 177.8 million tons this month and 183 million by the end of this year. Global wheat consumption is estimated in a range from 657 million ton to 661.2 million. Prices forecast to remain mainly in a range of $4.95-$5.65 per bushel.
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Floods in Canada and droughts in Australia, France, Kazakhstan and Russia threaten the grain production in those regions. According to the market researchers, the wheat production in Western Australia is to fall by 9.5 million ton this year. Russian exports may be decreased by the government limits this year as the crops are falling there.

Despite the fact that the world consumers will have to buy more grain from the southern hemisphere this year, such big holders of the wheat stockpiles as China and India will probably refrain from parting with them. Analysts believe that the prices will stop rising so fast only if some other exporters will cover the supply deficit. Technical analysis factors support the bullish point of view.

Wheat went up from $586.25 to $599.50 as of 16:33 GMT on CBoT today, a spike to $609.75 was recorded earlier.
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Gold fell as buyers regained confidence in world economy, curbing appeal of the precious metal as an alternative haven. Sales of all types of gold coins dropped to 53,930 ounces in the first two months of this year, compared with 267,091 ounces in the same period in 2009. Immediate delivery for bullion dropped 0.5 percent to $1,122.10 per ounce by 8:33 in London.
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Copper scrap discount to New York-listed futures declined by half in two months on deficit of used metal. Demand for the copper is rebounding on speculation that economic recovery will increase consumption. In the same time, scrap copper becoming scarcer because of harsh winter in the U.S. as snow hampers collection of scarp. May delivery for copper shrunk 0.3 percent to $3.4245 per pound by 11:17 on NYMEX.
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Corn and soybean prices advance with rising gasoline price, boosting the attractiveness of fuels produced from grain and oilseeds. Gasoline prices reached the highest level in five weeks, increasing demand for corn-based ethanol and biodiesel made from soybeans. May futures for corn delivery gained $0.11 (3 percent) to $3.8275 per bushel on the Chicago Board of Trade. May futures for soybean delivery rose $0.145 (1.5 percent) to $9.69 per bushel.
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Wheat, soybeans and corn dropped in Chicago after the dollar gained, making purchases of U.S. crops unprofitable for traders, who are using other currencies. May delivery for wheat lost 1.3 percent to $4.9325 per bushel on CBoT by 12:34. Argentina, the third biggest soybean exporter in the world, may produce more soybeans than previously predicted record 52 million tons with the aid of rains. May delivery for soybeans declined 0.7 percent to $9.575 per bushel. Corn planting is expected to increase from 86.5 million acres last year to 89 million this year. May delivery for corn fell 0.7 percent to $3.6625 per bushel.
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Sugar rose on speculation that farmers in India will not significantly increase planting of cane. A less-than-expected increase in planting area can lead to import of sugar by India, supporting prices. March futures for raw-sugar delivery rose 1.8 percent to $0.2707 per pound on ICE.
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Wheat futures gained in Chicago on forecast that supplies may decline because farmers in the U.S. cut selling after prices dropped last month to the lowest level since June. Prices are also aided by expectation of rising demand for U.S. wheat. March futures for wheat delivery went up $0.125 (2.6 percent) to $4.8725 per bushel on CBoT.

Cotton prices rose, ending the longest decline since September 2008, on outlook for improving demand in China, the biggest buyer of the fiber in the world. The area planted with cotton may decrease by 4.9 percent and reductions in the crop supply may cause Chinese textile producers to increase imports. March futures for cotton delivery gained $0.0104 (1.5 percent) to $0.6926 per pound on ICE.
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Analysts predict that gold may decline as a stronger dollar eroded appeal of the precious metal as an inflation hedge. The U.S. currency rose 0.8 percent versus the euro today. If the greenback rally continues, gold is going to go down. Immediate delivery for gold was little changed, remaining at $1,133.50 per ounce by 11:12 in New York.
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Crude oil fluctuated after forecasts that temperature in the northern U.S. will rise next week. About four-fifths of the U.S. heating oil consuming depends on the weather in the northeastern U.S. U.S. stockpiles of distillate fuel, including diesel and heating oil, slid 1.78 million barrels last week. February delivery for crude oil dropped $0.04 to $81.47 per barrel by 10:49 on the New York Mercantile Exchange.
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Orange-juice prices dropped to the week low after report that citrus harvest won’t be damaged by a cold weather. Possibility for some frosts remains but citrus harvest will be mostly untouched by a harsh weather. Orange-juice previously rose as hedge funds and other speculators were buying on concern that frosts will harm the fruits. March futures for orange-juice delivery fell $0.0275 (2 percent) to $1.379 per pound by 12:06 on ICE Futures U.S. in New York.
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Fundamentals can be considered bullish for the sweetener. Investment funds, limited production in India and a weak dollar are major supporting factors for sugar prices. The commodity also helped by demand for ethanol from Brazil’s flex fuel car fleet.

Global supplies of sugar will remain low for the first half of 2010. The world is using more sweetener than it is producing, causing a deficit for two consecutive years. The global sugar supply deficit is estimated as much as 13.5 million metric tons in the 2009–2010 season. There is some pending dryness in regions including India and Australia, curbing the commodity productions in these countries. On the other side, a favorable weather conditions are expected in Brazil’s Center-South, where increasing production may start to ease the current global deficit.

Beet growers in France and Germany, the two largest producers in the Europe, expect the greatest harvest since 2006. But EU regulations state that farmers may produce no more than 13.3 million metric tons of sugar for food for the domestic market, and surplus beet is considered out-of-quota and turned into export sugar or products such as ethanol. For the foreseeable future the European Commission is not going to authorize the export of out-of-quota sugar in excess of the fixed quantitative limit. Beet harvest of French growers is highest in 50 years, adding to this year’s EU oversupply of 550,000 tons. In case European growers will convince Commission to loose regulation the commodity deficit can be significantly reduce by European sugar.

Considering all factors, the outlook for sugar is rather optimistic. Most analysts agree that next target price for the commodity should be about $0.30. Yet some analysts argue that price as low as $0.13 more realistic. They point that such factors as possibility that mills will produce more sweetener than previously predicted and probability for unloading of funds positions in case if sugar prices will fall may put downward pressure on sugar. Even considering this factors its price is not likely to fall below $0.10. As always caution is advised when dealing with commodities.
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