February 26: Wheat Prices Show Gains on Increasing Drought

In Chicago, wheat prices pushed higher thanks to dryness concerns across the Midwest.

But weather woes in Argentina didn’t provide much support in the soybean complex.

This is your daily recap of grain prices from the Chicago Board of Trade.

Wheat Prices Gain on Weather Woes

Weather concerns spread across the wheat sector on Monday.

Forecasts suggest that there won’t be too much rain in the near future to help support a very thirsty crop. We saw red flag warnings across the Texas Panhandle and parts of Kansas as higher winds and drier forecasts are sparking fears about wildfires.

But in other regions of the U.S., there is too much water. Flooding is affecting some SRW wheat acres in the southeastern Midwest.

Meanwhile, extremely cold temperatures around the Black Sea have some analysts concerned about the state of dormant winter crops in Southern Russia and Ukraine. The weather was as low as minus 25 degrees Celsius. Frozen temperatures are pushing prices higher in the region, particularly for higher protein wheat.

Weather concerns outweighed a pretty dim export report from the USDA. Total exports for last week came in at 280,243 MT. That was a 34% drop from the week prior and more than a 48% decline from the same week last year.

In Chicago, March SRW contracts added 7.25 cents to close the day at $4.595. With Chicago wheat, managed money remains in a big net short position of -67,039 contracts. Hedge funds added 10,208 to that net-short position last week.

March HRW contracts in Kansas City added 9.5 cents to finish the day at $4.785 per bushel. That’s good news for funds that added to their position last week. According to the Commodity Futures Trading Commission, hedge funds net position on KC wheat decreased last week. [1] Managed money shed 1,585 contracts, but still maintained a net long position of 13,141 contracts.

Finally, in Minneapolis, March spring wheat prices ticked back under $6.00 per bushel for the first time in 2018. The contract ended the day at $5.9625.

Corn Prices End Up on Day

Corn prices finished the day in the green.

The March contract in Chicago added 2.25 cents to close the day at $3.685. The May contract gained 2.75 cents to close the day a tick above $3.77 per bushel.

Today was all about export numbers. There was a 125,000 MT sale of corn to unknown destinations reported by the USDA. In addition, the USDA reported that weekly shipments came in at 1.31 MMT for the week. That number as a 39% jump from the previous week. But it was a 10.5% drop from the same period last year.

That said the number still topped the average analyst forecast of 1.05 MMT.

There are two places from where corn prices continue to receive support. The first is Argentina, where dry weather continues to fuel downgrades across the complex. Meanwhile, farmers in Ukraine continue to hold out for higher prices as buyers have bolstered interest in recent weeks.

For these reasons, we saw managed money turned bullish on corn. Managed money added 29,288 long contracts to its position. That addition flipped sentiment. The net-long position is now sitting at 18,674 contracts.

The question moving forward centers on China’s buying habits. The nation has been gobbling up Ukrainian corn (a boost for the non-GMO kind). However, now that the nation’s holiday celebrations are over, markets want to know where demand will emerge.

Soybean Prices Pull Back

Soybean prices pulled back from seven-month highs as traders took some gains off the table. The selloff wasn’t too crazy though. March futures contracts in Chicago shed 2 cents to closed the day at a tick above $10.34. The May contract dipped 1.5 cents and finished at $10.46.

Argentina’s ongoing drought was the biggest headline of the day. Even though we’re expecting to see some rain in the forecast for key growing provinces this week, it doesn’t look like it’s going to be anywhere close enough to generate optimism about crop quality.

Today, the USDA reported a private sale of 132,000 MT to China for the current crop year. Total export inspections last week came in at 761,961 MT. That figure was about 21% behind the previous week, but about an 8% jump from the same time last year.

The good news out of this report is that China is still buying U.S. soybeans. Although there have been concerns about Chinese restrictions on the U.S. crop, the nation was the top buyer last week. In January, however, year-over-year exports to China fell by a little more than 14% from last year. Total Chinese shipments tallied 5.816 MMT for the month.

Managed money is really bullish in soybeans. Last week, the CFTC said that hedge funds added 56,242 contracts to their net long position. That position is now long at 99,111 contracts.

Managed money also increased its long position on soymeal by 14,098 to 85,089 contracts, while increasing its net-short position on soyoil by another 13,505 contracts.

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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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