January 24: Winter Wheat Prices Pop Wednesday

It was a big day for wheat prices, but not the usual reasons you might expect. On a quiet day of economic and trade data, grain prices pushed higher thanks to a weaker U.S. dollar.

And what prompted the greenback to slump today?

Treasury Secretary Steve Mnuchin said in Davos, Switzerland today that the Trump administration welcomed a weaker U.S. dollar as a method of bolstering American exports. That pushed commodity prices up.

The Trump administration appears poised to pick a trade war around the globe.

The President pulled the U.S. out of TPP negotiations last year and has threatened to pull the U.S. out of the North American Free Trade Agreement (NAFTA).

Just this week, the Trump administration placed tariffs on solar panels and washing machines produced abroad.

With the dollar at its lowest level in three years, he’s what else you need to know from the Chicago Board of Trade.

Wheat Prices Pop Wednesday

March SRW prices popped 11.5 cents to close the day at $4.33 per bushel. May contracts added 11.25 cents to close at $4.455.

In Kansas City, HRW contracts for March added 9.75 cents to close the day at $4.33. May contracts added 10 cents to close the day just above $4.47 per bushel.

Spring wheat prices in Minneapolis also saw some modest gains today. The MGEX May contract added 3.5 cents to close the day at $6.08 per bushel.

The May contract added 4 cents to finished the day just under $6.19.

Today’s uptick came from the weakness in the greenback and ongoing dryness across the Midwest. The drought conditions across the Plains are expected to continue over the next few weeks. While that might be bullish for the smallest wheat acreage figure in more than 100 years, we’re still another month or so away from surveying the damage.

A weaker U.S. dollar is making American wheat a more attractive buy for other nations. Further, it forces other currencies to appreciate (i.e. the Russian Rouble), which is a key factor in global wheat markets that we discussed the other day in GrainCents.

The U.S. dollar has slipped against the Russian Rouble over the last month. The exchange rate has declined from a high of 58.23 to a new low of 56.14 today. This is the lowest level that the dollar has been against the Russian currency since April 2017.

The other thing that we’ve discussed recently at GrainCents is the divide in trade policy between the U.S. and Canada.

While the U.S. has been going in reverse on free trade, Australia and Canada are hashing out details on the Trans-Pacific Partnership.

According to reports, Canadian and Australian wheat tariffs could decline as much as $65 per metric tonne once the agreement is finalized. [1]

Meanwhile, U.S. wheat will continue to face these tariffs due to America’s lack of participation.

As we’ve noted, this could be problematic in the Japanese market, where demand for high-protein wheat is only expected to rise in the years ahead. As a result of diverging positions on trade, the U.S. stands to lose its dominant position as the top exporter to Japan.

Corn Prices Tick Higher

March corn prices added 5.25 cents to close the day at $3.565. May corn prices added 5 cents and finished the day just under $3.65 per bushel.

A weaker dollar helped push prices higher, in addition to stronger demand fundamentals. The USDA reported a sale of 125,000 metric tonnes to Unknown Destinations. This was the second consecutive day that we saw the USDA report a large sale abroad.

Meanwhile, U.S. ethanol production remained above 1.06 million barrels per day for the week ending January 19.

Soybean Prices Pushing Toward $10.00

March soybean prices added 6 cents to close the day at $9.9225 per bushel.

The May soybean prices gained 6 cents to close just below $10.04 per bushel.

The weaker dollar played a role, but once again traders were digesting private reports on crop quality and production size in Argentina.

While the USDA isn’t ready to make cuts to its production or yield outlook in the South American country, more and more analysts are making cuts to account for ongoing dryness and crop damage.

Dr. Michael Cordonnier at Soybean & Corn Advisor slashed his Argentine production estimate by 1 million metric tonnes. He now pegs production at 52 MMT,

There wasn’t a lot of data today. But what did come in was positive. The USDA reported 132,000 MT of soy meal sales to the Philippines for 17/18 delivery this morning.

Be sure to sign up for the Breakfast Brief each morning, and start making your grain marketing more profitable. We’ll talk to you tomorrow.

 

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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