Chicago Wheat Pauses After Hitting 4-Month High on US Sales to China
Chicago wheat futures maintained stability on Thursday following a surge to a four-month high in the previous session, driven by China’s continued purchases of U.S. wheat. The recent buying spree by China, the third in as many days, propelled wheat prices to their highest level since August 9. Concerns about crop damage from hot and dry conditions were alleviated by a forecast of rain in major exporter Brazil, causing soybeans and corn to edge lower after Wednesday’s decline.
The most-active wheat contract on the Chicago Board of Trade (CBOT) held steady at $6.33 3/4 a bushel. This came after reaching $6.49 1/2 on Wednesday, marking an impressive 12.5% gain since November 28. Meanwhile, CBOT soybeans fell slightly to $12.95 a bushel, and corn dropped 0.1% to $4.84 a bushel.
The United States Department of Agriculture (USDA) confirmed the sale of 372,000 metric tons of U.S. soft red winter (SRW) wheat to China on Wednesday. This latest purchase brings the total wheat sales to China since Monday to over 1 million tons, outstandingly the largest one-week total since July 2014 and nearly the highest ever. Investors who had heavily speculated on price declines engaged in short-covering as a result of these sales. Commodity funds turned net buyers of CBOT wheat on Wednesday, highlighting the market’s bullish sentiment.
Moreover, meteorological officials in Russia reported that the conditions of winter crops are better than last year, with only 4% deemed to be in a poor and thinned state. Russia’s agricultural ministry projects the nation to produce its second-largest harvest in 2023, second only to the record-breaking harvest of nearly 158 million tons in 2022. The availability of abundant cheap supply from Russia significantly contributed to pushing CBOT wheat to a three-year low of $5.40 in September.
On the other hand, Brazilian grain traders anticipate record volumes of corn and soybean exports in 2023 due to a successful harvest and strong demand from China. Trade group Anec predicts that Brazilian corn exports will reach a staggering 55.95 million metric tons, up 25% from last year, while soybean exports are forecasted to hit around 101.2 million tons, marking approximately a 30% increase compared to 2022.
The decline in corn and soybean prices on Wednesday was partly influenced by the 3.8% drop in U.S. crude oil futures, hitting a five-month low. The sharp decrease in oil prices diminished inflationary pressures and provided a boost to the global bond market. Additionally, the soybean market shrugged off the USDA’s confirmation of the sale of 136,000 metric tons of U.S. beans to China.
Traders eagerly await updated crop estimates from the Brazilian government agency Conab on Thursday, as well as the monthly supply/demand reports from the USDA scheduled for release on Friday. Analysts surveyed by Reuters anticipate the USDA will lower its estimates for Brazil’s 2023/24 soybean and corn crops.
Finally, Asian shares mirrored the downward trend on Wall Street on Thursday. However, the fall in oil prices to a five-month low is expected to alleviate inflationary pressures and provide further support to the global bond market.
In conclusion, Chicago wheat held steady after soaring to a four-month high driven by China’s continued purchases of U.S. wheat. Rainy forecasts in Brazil eased concerns over potential crop damage, causing soybeans and corn to dip. Traders eagerly anticipate updated crop estimates from Brazil and the upcoming supply/demand reports from the USDA. The global bond market received a boost from a decline in oil prices, assisting in alleviating inflationary pressures.
*(Reporting by Peter Hobson; Editing by Mrigank Dhaniwala)*
