May 23 – Wheat Prices Rip Higher in Chicago

Ongoing weather concerns helped push wheat prices higher in Chicago. Meanwhile, December corn prices closed at their highest levels in a year. Despite tempered expectations out of President Donald Trump on trade with China, soybean prices also pushed higher.

Let’s dive into what happened on Wednesday at the Chicago Board of Trade.

Wheat Prices Pop on Weather Reports

In Chicago, July SRW prices added 9.5 cents to close the day at $5.31 per bushel. September wheat prices added 9.25 cents and finished the day just under $5.48 per bushel.

In Kansas City, HRW contracts added 11.25 cents and closed the day a tick under $5.52. The September contract added 11 cents and ended the day just above $5.70.

The warm, dry weather has continued to provide support to the market.

Spring wheat prices also pushed higher. The July MGEX contract added 9 cents, while the September contract added 8 cents. July spring wheat is trading at $6.42 per bushel. September wheat is just a tick under at $6.47. Ongoing rain across the Northern U.S. states is likely to delay planting for the week.

Tomorrow, the USDA will release its weekly update on U.S. grain sales and exports. Analysts are saying that tomorrow’s numbers for winter wheat could go backward. We’re seeing estimates for net reductions up to 100,000 MT to sales of 100,000 MT. New sales are estimated to come in between 100,000 MT and 400,000 MT.

Be sure to check back with us tomorrow afternoon as we break down the results of Thursday’s U.S. exports report.

Soybean Prices Kick Higher

It was a good day in the soybean complex as soybeans, soybean meal, and soybean oil contracts all closed the day higher. July soybean prices added 8.75 cents to close the day a tick above $10.39. August soybean contracts added 9 cents to close just above $10.43.

What helped push prices higher?

It looks like China is returning to the U.S. markets. Chinese buyer Sinograin is reportedly looking for American supply, and sellers are happy to welcome them back. [1]

It would be the first time that Sinograin has come to the United States since the beginning of April. It is also a much-needed sign that trade tensions between the U.S. and China have eased significantly. Last weekend, China pledged to purchase more U.S. agricultural products, while the U.S. eased rules that ban American companies from supplying products to Chinese telecommunication giant ZTE Corp. The recent seven-year ban by the U.S. government had crippled its operations.

Meanwhile, Argentina’s problems are back. The country had already faced a crippling drought that fueled a huge drop in their soybean supply. What is left and moving to the global markets are going to be stalled on Thursday. Workers are shutting down the nation’s ports as they strike over working conditions and wages.

The nation’s basket case economy is again facing extreme pressures and its currency has plunged by 20% since April 26. Annual inflation is sitting above 30%, while poverty levels sit above 30%. [2]

Corn Prices in the Green Again

Corn prices ripped higher again. July corn is sitting at $4.085 after gaining 3.75 cents. The September contact added 3.75 cents and ended just above $4.17. Traders were setting their positions ahead of Thursday’s export report.

Trade estimates for old crop sales range between 700,000 and 1.1 MMT. New crop estimates range between 100,000 and 250,000 MT.

While tomorrow’s numbers will draw greater headlines, we did get a few figures on the domestic front today. First, the USDA reported a private sale of old and new corn crop totaling 140,000 MT to Saudi Arabia.

Meanwhile, the Energy Information Administration announced that U.S. daily ethanol production dipped by 30,000 barrels for the week ending May 18. Total production sits at 1.028 million barrels per day. Ethanol stocks increased by more than 620,000 barrels.

But that’s not the only big news in the ethanol sector. A breakthrough on the U.S. and China trade deal could be a big boost to American ethanol producers. China has committed to purchase more U.S. agricultural products in an effort to reduce the American trade deficit by $200 billion.

China will be adopting its E-10 standard in 2020. The country will require about four billion gallons of ethanol by 2020, and it’s very apparent that they will have to import due to the likelihood of production constraints. It might be too early to start speculating on how much China is going to buy. But this is an important trend to watch and a bullish factor for corn prices in the years ahead.

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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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