Wheat is the weed that feeds. The grain-yielding grass is such a hearty plant that it is grown on more land than any other crop in the world. After four straight seasons of record harvests, bins are bulging from Kansas to Western Australia and prices are near the lowest in a decade.

But there are signs the glut may not last much longer, or at least that supplies may tighten enough to halt the four-year slump in wheat futures. Farmers are planting less because many are losing money. At the same time, global consumption is at an all-time high. And the risk of crop-damaging weather lingers over key exporting countries this year.

“It’s difficult to be overly bullish,” said Benjamin Bodart, a director at adviser CRM AgriCommodities in Newmarket, England. “The world is still awash with wheat. You cannot deny it. But when you dig a bit further, the downside now is fairly limited.”

While many money managers remain bearish — they’ve bet on lower prices for 17 months straight — wheat is expected to gain in 2017 for the first time in five years, according to a Bloomberg survey of 13 analysts. Rabobank says there is a ‘real possibility’ of a supply shock in the US and Europe if farmers shift to more profitable crops and JPMorgan Chase predicts a stockpile drop this year of 8.4pc.

It’s not difficult to see why the market slumped for so long. Wheat used in everything from bread to cakes and noodles thrives in all sorts of climates, and every few months there are crops being harvested somewhere in the world. Global production will reach an all-time high of 751.3m metric tonnes once the current Southern Hemisphere harvest is complete, leaving stockpiles at 252.1m tonnes, the most ever, US Department of Agriculture data show.

Russia, the world’s top exporter, said on Dec 28 that its 2016 wheat harvest jumped 19pc, more than analysts forecast. Farmers in Argentina are harvesting what will probably be their biggest crop since 2012, according to CRM AgriCommodities. And because wheat is sold in dollars on global markets, the currency’s strength is boosting the incentive for growers outside the US to ship more, even with lower prices.

“For prices to move substantially higher from here, we need to see some signs of supply being restricted, either by a weather event or by the fact that production levels are curtailed,” said Fiona Boal, director of commodity research at London-based Fulcrum Asset Management, which oversees about $5.2bn.

Already the prolonged slump in prices has discouraged farmers. The London-based International Grains Council in November predicted a decline in global planting. That includes fewer acres for top consumer China and declines for major exporters, including the US, Canada, Australia and Kazakhstan.

In the US, the No 2 exporter, growers probably seeded the fewest acres of winter wheat in at least 104 years, according to the average estimate of 25 analysts surveyed by Bloomberg before a Jan 12 USDA report. Winter wheat, the most-common variety grown in the country, is sown in the fall, goes dormant during the coldest months of the year, and is harvested in the spring.

Some farmers in Kansas, the largest US producer of winter wheat, could lose money on every bushel, according to data from Kansas State University in Manhattan. The crop cost about $5.04 a bushel to grow in the state’s south-central areas. That’s below the average national cash price for hard red wheat of $3.38 as of Jan 6.

A big reason for the wheat glut in recent years was mostly beneficial weather, which allowed crops to flourish and yields to improve.

In December, the condition of dormant US wheat crops declined. Parts of US have received less than half of normal precipitation since early October, according to US Drought Monitor. Through March 31, drought is likely to persist.

In parts of Ukraine, the fifth-largest exporter, the layer of snow that protects plants from freeze damage may be insufficient to shield some crops during a cold snap, researcher UkrAgroConsult said Jan 5. The country has since been hit by snow blizzards and storms with temperatures of minus 25 degrees Celsius in western regions, broker Veles-Agro said on Jan 9.

With the USDA predicting global wheat consumption rising 3.5pc to a record 734.3m tonnes in the 2016-17 season, JPMorgan says inventories will drop in 2018 to 228m tonnes from an estimated 249m this year.

Prices in 2017 will reach $4.50 a bushel and advance to $4.81 in 2018, according to the median estimates of analysts in the Bloomberg survey. They are up 4.7pc so far this year in Chicago at $4.27 a bushel, off to the best start since 2010. Rabobank predicts futures will rally in each quarter this year, ending at an average of $4.60 in the fourth quarter.

— Bloomberg/The Washington Post Service

Published in Dawn, Business & Finance weekly, January 16th, 2017