Chicago Wheat Futures Fall Following Chinese Purchase, Soybeans Edge Higher
Chicago wheat futures experienced a decline on Tuesday after reaching their highest level since August in the previous session. The surge was attributed to the confirmation of the largest one-off private wheat sale to China in years by the U.S. government. However, soybeans managed to edge higher after recent declines, as rain forecasts provided some relief regarding supply concerns in drought-affected regions of Brazil.
The most-active wheat contract on the Chicago Board of Trade (CBOT) fell 0.5% to $6.17-1/2 a bushel, down from Monday’s peak of $6.26-1/2. This recent climb in wheat prices amounts to a 10% increase over the past week. In contrast, CBOT soybeans rose by 0.1% to $13.07-3/4 a bushel, while corn experienced a 0.3% decline to $4.84-1/4 a bushel.
A major highlight was the confirmation by the U.S. Department of Agriculture (USDA) of China’s purchase of 440,000 metric tons of U.S. soft red winter wheat. This transaction marks the largest Chinese acquisition of U.S. wheat since at least 2020. Peter Hobson, a market analyst, commented, Speculators have built a large net short position in wheat futures, leaving the market vulnerable to bouts of short-covering that push prices higher.
Concerning global grain exports, Ukraine has witnessed a decline in grain exports to approximately 13.4 million metric tons during the July 2023-to-June 2024 marketing season, compared to 18.3 million tons during the same period last year. Conversely, cheap wheat exports from Russia have been keeping prices near three-year lows recently. However, last week, Russian export prices increased slightly, leading consultants Sovecon to lower their estimate for November shipments by 0.4 million tons to 3.4 million tons.
While the Russian harvest is nearly complete, Canadian farmers are expected to harvest more wheat than initially anticipated, as indicated by a government report. However, the report still predicts the second-smallest crop in six years, at 32 million metric tons. Similarly, the Australian government raised its forecast for winter wheat production by approximately 100,000 metric tons. Nevertheless, due to dry weather impacting yields, the estimated harvest of 25.5 million tons would still be 37% smaller than the previous year’s crop.
Overall, relatively small crops in Australia, Canada, and Argentina contribute to the current global undersupply of wheat. On a different note, corn, which has remained close to three-year lows, received a boost from a USDA report revealing that more than 1.2 million metric tons were inspected for export in the latest week, surpassing trade expectations.
In broader financial news, Asian stock markets slipped to three-week lows on Tuesday. Investors tempered their expectations for cuts to U.S. interest rates while awaiting U.S. jobs data. Simultaneously, bonds and the dollar steadied in response to the market sentiment.
As the market continues to adjust in response to various factors, including trade between major nations and weather conditions impacting the harvest, the wheat, soybean, and corn markets will likely experience fluctuations in the coming days and weeks.
[Proofread and edited by John Smith]
