December 27: Frozen Temperatures Lift Wheat Prices

It’s minus 16 wind-chill here in Chicago, which makes it hard to think about wheat prices.

It’s not clear why they report that it’s 9 degrees Fahrenheit… but… with the wind-chill… it actually feels like minus 16 degrees.

If it feels like minus 16 degreesthen it’s minus 16 degrees!!!

They didn’t even write about these temperatures in the Bible.

And trust me, a prophet would have told us about this sort of cold after he or she got feeling back in their face.

I decided to put on 47 layers of pants and brave the cold to bring you our daily recap of grain trading from the Chicago Board of Trade.

So, if you’re thankful for anything this New Year’s week, be it that you are warm right now and that someone else was insane enough to risk frostbite to give you insight on what traders were discussing in Chicago.

That, and where wheat prices finished.

This is your Grain Markets Today for Wednesday.

Wheat Prices Whip Higher

The cold snap across the Midwest offers some support to wheat prices here today. The March SRW contract added 5.75 cents and closed the day at $4.28 per bushel.

The May contract added 5.75 cents and closed a tick above $4.41.

Wheat prices saw similar returns down in Kansas City. The March HRW contract added 5.5 cents and closed at $4.255. The May contract added 5.75 cents and finished at $4.39.

Spring wheat prices showed the strongest gains on the day. The MGEX contract for March added 10.25 cents to close a tick above $6.21 per bushel.

On Wednesday, it was the cold that brought wheat prices higher. Wheat producing states across the central portions of the country are experiencing bone-chilling cold. It doesn’t help that only a small amount of snow is covering fields, which is exposing the crop to potential winterkill.

Once again, Russia is getting all of the deals out of Egypt.

The country will fill a tender of about 6.6 million bushels. Of course, the U.S. and Canada didn’t make an offer.

Just Romania.

As we’ve noted, Russia has a massive price advantage sourcing to the Middle East.

Of course, it’s not just the advantage in wheat prices.

Russian production just continues to rise.

When it comes to Russia’s 2017 wheat output, Alexander Tkachev, the head of the Ministry of Agriculture for the Russian Federation, is like a guy working the gas station price sign during a hurricane.

He’s just up on the ladder adding numbers…

The latest report from TASS, the Ministry’s press service, says that total harvest net weight came in at 85.8 million tonnes.

I was out yesterday, so I didn’t touch on what’s happening with managed money. The latest report from the CFTC showed that funds were net-short soft-red winter wheat by 164,908 contracts as of Dec. 19. That’s a small decline from the previous week. On hard red winter wheat, funds are net short by 31,177 contracts.

Corn Prices Find Gains

Did I really come all the way downtown to see that corn prices gained just a penny today?

Yes, I did.

The March corn contract gained one cent to close a tick below $3.54 per bushel.  There’s been a solid round of buying recently, but we can tie a lot of this to funds covering their short positions. The CFTC said that for the week ending Dec. 19, net shorts came in at 223,405 contracts. This was the largest position since the week of Thanksgiving.

Once again, the weather is playing a big role in the corn crop both in the United States and Argentina.

Since Oct. 1, Argentina has only seen 7.4 inches of rain in its corn-producing region.

That’s a big drop from the 13 inches we saw last year, and well below the 13.5 average.

Soybeans Go in Reverse

January soybean prices fell 3.75 cents to close the day at $9.555 per bushel. The March contract shed three cents to finish at $9.675.

It was a pretty boring day on the data front. The U.S. shipped four million bushels of 2017 crop to China. But this isn’t the best news considering developments out of Brazil and Argentina. The former country is still sitting on a lot of available crop for sale, and the recent round of rain across the country is expected to bolster yields

In Argentina, the weather is heating up. Time to buy a plane ticket, unless it’s too cold for a flight to take off out of O’Hare. It will be 100 degrees down in Argentina over the next few days.

While that heat is going to generate some headlines and concerns about its impact on the crop, it now appears that the soy-producing regions have received enough rains in recent weeks to alleviate concerns about the late start to the planting process.

Macro Recap for Wednesday

Finally, I did manage to find someone who was having a more difficult day than I was.

Not because of the weather… but because of the tax reform bill.

The job you don’t want today is being an accountant. With the President signing the largest tax reform law in 30 years, every accountant in the country had their Holiday break dismantled. Everyone is now scrambling to look at spreadsheets and make sense of this massive reform bill to determine how it will affect their finances in 2018.

We’re going to talk to some experts and help them make sense of this tax bill and how it affects them heading into the new year.

We’ll be back tomorrow.

Be sure to check back to our Insights blog starting this weekend for our 2017 recap of 12 major commodities. Then, starting next week, FarmLead President & CEO Brennan Turner and I will begin releasing our outlook for 2018. If you’re growing corn, flax, soybean, winter wheat, durum, spring wheat, or pulses, you’re going to want to bookmark our blog.

Enjoy your Wednesday evening.



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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