August 29: Wheat Prices Surge on Russian Rumors

Wheat prices whipped higher on rumors that Russia may slow down its exports in the wake of a disappointing harvest. Contracts in Chicago and Kansas City popped more than 3%. The nation’s agricultural ministry is preparing for a meeting with exporters on September 3rd. Markets cheered this update in the wake of the August 17th meeting with Russian grain exporters.

Soybeans and corn were flat in comparison in Chicago. Here’s what else you need to know about commodities on Wednesday from the Chicago Board of Trade.

Russian Rumors Cause Wheat Prices to Surge

December SRW wheat prices added 18.5 cents to close the day a tick under $5.42 per bushel. The March 2019 contract added 16.75 cents to finish at $5.625.

In Kansas City, December 2018 contracts added 21.5 cents on the day. In Minneapolis, December spring wheat contracts added 14.5 cents to end at $5.915. The March 2019 contract $6.075.

The big news today was a letter obtained by Reuters from Russia’s National Association of Exporters of Agricultural Products. Following a meeting on Tuesday with the nation’s agriculture ministry, the association said it is exploring a cap on grain exports at 30 MMT. That would likely put a curb on wheat exports right around 25 MMT.

At the current pace, Russia would likely hit that 25 MMT cap around December, which would force it to pull out of the international market and put pressure on buyers in Europe. However, it’s important to note that the letter was based on speculation and didn’t quite capture the mood of the meeting.

Soybean Prices Find Small Gains

Bargain buyers are snapping up soybeans thanks to the sharp downturn in recent days.

November 2018 contracts for soybeans added 2.75 cents on the day. The contract closed at $8.36 per bushel. January 2019 contracts added 2.75 cents to end the day a tick above $8.409 per bushel.

The markets largely ignored news that China had sold 40,266 MT of 2013 soybeans at auction today.

The question is whether the recent downturn in prices will provide a boost to exports. Tomorrow, the USDA will announce weekly export numbers. Trade analysts expect that the sales for the week ending August 23 will come in between 18.4 million and 45.9 million bushels.

Canola prices pushed a bit higher today thanks to the small boost in soybean prices. The November 2018 canola contract added CAD $2.70 per tonne to close the day at $491.30. The January contract added CAD $2.70 to finish trading Wednesday at CAD $497.90.

Corn Prices Flat as NAFTA Headlines Swirl

Corn prices were up marginally on the day. December 2018 corn contracts added 0.25 cents to close the day at $3.565. The March 2019 contracts added 0.5 cents to finish at $3.695.

Markets continue to monitor the progress of trade negotiations between the U.S., Mexico, and Canada. As Brennan noted this morning, the bilateral deal between the U.S. and Mexico puts Canada in a difficult position. Given that 75% of Canada’s exports head south, President Donald Trump recognizes the leverage held by the United States.

U.S. farmers are hoping that a deal between the three countries can provide a boost to corn prices. However, it’s important to note that the U.S. decision to threaten Mexico over auto tariffs that pushed the country to seek corn and other commodities from South America. This has given Mexico a better source of diversification while softening demand for American supply.

Today, the Energy Information Administration announced that daily production in the U.S. hit 1.07 million barrels of ethanol per day for the week ending August 24. That figure was cut by 23.06 million barrels.

Tomorrow, we’ll be turning our attention to the USDA weekly export report. The agency is expected to report weekly exports between 27.6 million and 51.2 million bushels.

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About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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