Wheat futures on the Chicago Board of Trade (CBOT) surged to their highest level since October on Thursday, driven by concerns that cold weather could damage crops in the Black Sea region, according to analysts.
Cold weather expected next week in Russia and Ukraine, key global wheat suppliers, rekindled fears of crop damage, particularly after a relatively mild winter. Commodity funds also contributed to the price hike through short covering, betting that wheat prices would fall. However, this shift in strategy pushed wheat prices higher, as traders refocused on potential crop vulnerabilities.
Karl Setzer, partner at Consus Ag Consulting, explained that commodity funds were predominantly positioned long on corn and soybeans while holding a net short position in wheat. “Funds are long corn and soybeans, and wheat is trying to catch up,” Setzer said. “Typically, you don’t see them short one complex and long the other two, so when there’s buying, it gravitates toward that one.”
The most-active CBOT March wheat contract rose 15-1/2 cents, reaching $5.87-3/4 per bushel. Meanwhile, March corn edged up two cents to $4.95-1/4 per bushel, and March soybeans inched 3-1/2 cents higher to $10.60-1/2 per bushel.
Grain markets were also buoyed this week by the suspension of planned U.S. tariffs on Canada and Mexico, coupled with Chinese counter-tariffs that excluded agricultural crops. The uncertainty surrounding potential retaliatory tariffs had caused concerns that U.S. grain exports, particularly to major importers like China and Mexico, could be harmed.
Adding to the complexity of the trade situation, President Donald Trump’s nominee for U.S. trade representative, Jamieson Greer, indicated plans to review China’s adherence to the “Phase 1” trade deal, signed during Trump’s first term. Under the deal, China committed to purchasing more U.S. agricultural products. However, analysts note that enforcement could prove difficult, especially since China has not fully met its purchasing commitments.
Setzer questioned the feasibility of compelling China to buy more farm products when there may not be demand, saying, “How do you force an importer to buy more when they don’t need it?”
Related topic:
