“Short-term view is that the selling pressure will continue. In particular, that 500 cents/bushel level is exceeded led investors to increase their negative expectations about this level. Together with the already high expectations, dollar’s gaining value increase the estimates that selling pressure will be more effective. Especially weakening economy of developing countries affects the demand adversely and may also be effective in futures markets.” Zafer ERGEZEN Futures and Commodity Market Specialist contact@zaferergezen.com After the price of wheat rose up to 530 cents/bushel in November it decreased again due to sales. I've already mentioned the effect of negative data in my previous article. The weakening of the Chinese economy, the strengthening dollar and record production forecast, has led to an increase in selling pressure. Particularly the slowdown of emerging economies, including China, clearly demonstrates the effect on the demand side. Therefore, it is seen that the negative future price expectations increased. As well as the fact that the US central bank (Fed) is expected to increase interest rates is another factor on the selling pressure. US interest rates are expected to increase along with value increase of the dollar. Talking about this possibility is also increasing the value of the dollar. With the, losing value of commodity prices of which price is determined by dollar-denominated should be considered normal. With the increase of value of dollar, the cost of the wheat produced in countries such as Russia, China Kazakhstan, and therefore its price fall. Compared to the beginning year, it is seen that US dollar gained value against other currencies. It has also relatively negative impact on demand. The production estimates are still high. Estimates of production which reached record levels are still high due to the favorable weather conditions. Although El Nino led to a fall in some commodity estimates it seems to have a positive effect on wheat production. SALES PRESSURE INCREASED IN TURKEY As I mentioned in my earlier articles, prices in Turkey remained strong compared to global markets. But in November, we see that selling pressure in Turkish market is effective despite being mild. There was a slight decrease in the volume of trade with the approach of winter. But it seems obvious that demands are still in high. We see demand for basic food as particularly wheat and flour is a high. If we look at the forecast wheat production in Turkey high production is expected to continue. According to the Turkish Grain Board (TMO) estimates, wheat production is expected to reach22.5 million tons with an increase of 18% in 2015 compared to last year. TMO has carried 3.3 million tons of wheat purchases for 2015 so far. Diyarbakir was the most wheat purchasing branches with 404 thousand tons. The amount of bread wheat purchases which constitutes a large portion of the TMO's purchases of wheat totaled 1.8 million tons. TMO is expected to pay 750 million lira about $ 2 billion to producers in return for purchases at the end of 2015. INCREASE EXPECTATION IN PRODUCTION IS 11 MILLION TONS According to a forecast report released by US Department of Agriculture (USDA), production amount showed an increase of 190 thousand tons compared to the previous month. Thus production figures rose to 732.98 million tons. The increase of production estimates in the last three months reached 11.02 million tons. Briefly, production is expected to be more than the last season. Compared to 2012, the increase in production is remarkable to reach 74.26 million tons. This figure corresponds to approximately 10 percent of world wheat production. The increase in the amount of the last three years explains the selling pressure in the wheat market. We see the rise in the previous months the remains quite limited this month. But we have already reached record production levels. In November estimates, even the protection of previous expectations does not change the access to a large amount of wheat in the market. Production expectations have increased especially in Australia, Europe and Canada. But the upward trend in the period-end inventory was broken in November. End-period stock estimates fell 1.19 million and decreased by 227.3 million tons. Thus, the amount of increase in wheat stocks in the last two months has dropped to 24.9 million tons. Increasing wheat demand compared to the previous month is effective on the stocks. Europe and China stand out in increase of wheat consumption. Particularly in China, the increase in wheat consumption seems remarkable despite the slowdown in the economy. This appears that there is a demand for basic food demand in this country. China which will consume 16 percent of world wheat production alone holds 40 percent of world wheat stocks. In Europe, there is revival in consumption together with high production. We see that relatively favorable developments in the economy are also reflected in the demand side. But demand is still standing is a question mark as to what extent it will meet high production. In short, while increase in production remains limited in November, it appears that the increase in consumption led to a decline in the stock estimates. The largest wheat producer in the world in the new season again will be European Region, China and India. Almost half of the world's wheat production will be realized in these three regions. It is estimated that the highest wheat imports will be realized in North Africa, Middle East and Southeast Asia. 38 MILLION TONS OF INCREASE IN FINAL STOCKS International Grain Council (IGC) did not change its wheat production forecast compared to the previous month. In this sense, there seems to be a parallel forecast with the US Department of Agriculture. IGC expects world wheat production to be 726 million tons. End of the period stocks in IGC report at fell to 208 million tons, with a decrease of 1 million compared to the previous month. After decline in production estimates in October, it is understood that the expectations remain the same. Briefly, a more stable market is expected to be. Another considerable point is that the end of stocks point to an increase of 38 million tons compared to 2012. While the world wheat production has increased, it is understood that the demands did not increase in the same amount. we follow closely in the past year that already low demands created selling pressure on the prices. According to the World Food and Agriculture Organization (FAO) estimates, world wheat production is expected to be 736.2 million tons, namely an increase of 1.4 million tons compared to the previous month's forecast of FAO predicts. Thus, the production will have reached the highest figure in the last five years. Behind the increase in production estimates, it stands high production expectations in Europe. Although the production forecast of Australia and the US declined in the previous month, it seems that increased production expectations in Europe easily met this. According to FAO estimates, end of stocks will increase to 207.4 million tons. According to previous estimates, it is expected to increase to 1.5 million tons. Thus, the total supply of wheat will reach 938.8 million tons. 472 CENT/BUSHEL LEVEL STANDS OUT As a result, considering the average estimate of three organizations that forecast for the global cereal market, average world wheat production is expected to be 731.73 million tons. Compared to the previous month, an increase of 200 thousand tons is forecasted. The end of stocks will decline to 214.23 million tons. So it is estimated that there is 900 thousand tons less stocks compared to the previous month. Wheat prices for March at the Chicago Commodity Exchange, stands again at 472 cents/bushel level. In case of switching this level downward, we can see that sales pressure increase. Short-term view is that the selling pressure will continue. In particular, that 500 cents/bushel level is exceeded led investors to increase their negative expectations about this level. Together with the already high expectations, dollar’s gaining value increase the estimates that selling pressure will be more effective. Especially Weakening economy of developing countries affects the demand adversely and may also be effective in futures markets.