Agriculture Reference
In-Depth Information
edge of available wheat and their beliefs about
price to profi tably move wheat from its present
location to the buyer's location. Wheat moves
through the distribution system by bids from
processors and traders. The decision to move
wheat from the local elevator to a terminal eleva-
tor or direct it to a fl our mill across the country
often is made by traders—who might never see
the grain—completing the ownership transac-
tions. Large terminal elevators with rail and
barge access to large cities and international
ports compete with other terminals across the
region and world to supply wheat to buyers
worldwide.
This competition begins when a country issues
a tender to buy wheat. This tender, or buying
intention, describes the terms under which the
buyer would be willing to transact business.
Quantity, wheat quality parameters, shipment
timing, delivery method (barge, ship, or rail),
and payment terms are part of the process. Grain
exporters and traders compete for buyers' busi-
ness by submitting offers to the complete tender
or a portion of it. Ultimately, this supply compe-
tition works its way back to the elevator that has
wheat available to ship. If enough elevators or
small terminals are reluctant to part with the
wheat, the price the exporter has to pay to accu-
mulate the wheat increases and, ultimately, infl u-
ences the price quoted to the buyer.
The link from farmer to buyer can seem
complex or distant, but in reality, buyers
speak directly to suppliers through purchase
choices. Buyers inform wheat producers and
sellers which items are of most value, in the form
of functional quality parameters or physical char-
acteristics quoted in a tender, by revealing their
willingness to pay. The market tallies individual
choices of the multitude of buyers to signal
changes to sellers. Buyers' collective eagerness or
reluctance to return to a particular region or
country for supply can be felt directly by wheat
sellers. Quality attributes desired by buyers at
harvest can signal farmers which cultivars to
plant over time. An advantage of the single-desk
system is found in the speed at which this
market signal prompts farmers and invokes
responsiveness.
FUTURE PERSPECTIVES
Predicting trends in world wheat trade is
folly; too many factors are involved, and these
change annually. However, analyzing broad
contributors to world grain trade can provide
insight into their potential effects throughout
the wheat industry. Next, broad contributors
to the future of grain trade are considered
(numbered), followed by anticipated effects on
wheat trade:
1.
Grain will be used as a source of liquid fuel
for combustion engines.
Future effects:
a.
Corn does not return to historic values
of $2.00 per bushel.
b.
Wheat does not return to historic values
of $3.00 to $4.00 per bushel.
c.
Wheat loses ground to rice as the staple
crop.
2.
Without intervening forces, wheat will con-
tinue to fall behind corn and other crops in
farmers' planting decisions.
Future effects:
a. Major wheat producing countries pursue
transgenic wheat research, and world
buyers accept transgenic wheat as a
viable alternative to dramatically higher
food prices.
b. Governments temporarily restrict ex-
ports to protect their wheat supply for
food use.
c.
Governments alter agricultural policies,
allowing more land area to be planted
with fewer restrictions.
3.
Freight costs increase in real cost and as a
percentage of commodity value.
Future effects:
a. Wheat is increasingly traded within
regions to limit the effect of freight
costs.
b.
Regional commodity exchanges develop
to better discover the value of wheat
from nontraditional suppliers.
c.
Wheat trade by nontraditional suppliers
increases as a percentage of total world
