U.S. grains: Soybeans inch up on China purchases

U.S. wheat dips to lowest level in more than a year; ethanol stocks, mounting farm debt weigh on corn

may soybeans
CBOT May 2019 soybeans with Bollinger (20,2) bands, a gauge of market volatility. (Barchart)

Chicago | Reuters — U.S. soybean futures inched upward on Thursday on news that Chinese state-owned firms bought at least 500,000 tonnes of U.S. soybeans, while wheat futures dropped to their lowest levels in more than a year on pressure from a strengthening dollar, traders said.

Chinese state-owned firms bought the U.S. soybeans for shipment primarily from Pacific Northwest grain export terminals from June to September, two traders with knowledge of the deals said.

The purchases were the first since U.S. Agriculture Secretary Sonny Perdue tweeted that China had committed to buying an additional 10 million tonnes of U.S. soybeans during trade talks on Feb. 22.

Dealers continued to keep a close watch on trade talks between the United States and top soybean buyer China. U.S. President Donald Trump on Wednesday said the talks were moving along well and predicted either a “good deal” or no deal between the world’s two largest economies.

Chicago Board of Trade most active May soybean futures settled up 1/2 cent to $9.02-1/2 a bushel on Thursday (all figures US$).

Wheat falls

CBOT wheat futures hit new contract lows across the board on Thursday, despite higher-than-expected exports reported by USDA, traders said.

Most active May wheat futures on the Chicago Board Of Trade settled down 11-3/4 cents to $4.38-1/4 a bushel, after dipping to a low of $4.37-1/2.

U.S. export sales of old- and new-crop wheat totalled 826,700 tonnes for the week ended Feb. 28, according to USDA data released on Thursday. Trade estimates had expected between 200,000 and 600,000 tonnes.

Increasingly tough competition from the Black Sea region has the market worried that any uptick in wheat exports could be an exception, rather than a sign of mounting demand for U.S. wheat, traders said.

A record volume of U.S. wheat would need to be exported in the next few months to meet USDA’s forecast, the traders added.

The European Union has also struggled to compete against Black Sea suppliers, with soft wheat exports running 16 per cent below last year’s pace.

Weather concerns also have been drawing interest in wheat spread trades, said Matt Connelly, grains analyst at The Hightower Report in Chicago.

“With three feet of snow in the Northern Plains and the cold weather setting in, there’s concerns over spring wheat acreage possibly being reduced,” Connelly said.

Those planting questions had spread traders on Thursday buying Minneapolis wheat futures and selling Kansas City wheat futures, widening the price difference to more than $1.20 a bushel for the May contracts.

Debt worries, ethanol stocks

U.S. corn prices also eased Thursday, weakened by high ethanol stocks, which could curb demand from biofuel producers. The most active May corn futures settled down 7-1/4 cents at $3.65-1/4 a bushel.

The U.S. Energy Information Administration said ethanol stocks rose to 24.26 million barrels, the highest for a year.

Corn futures also faced pressure after a USDA farm income report Wednesday that forecast U.S. farm debt will reach $426.7 billion in 2019, the highest since 1982.

With U.S. corn planting already beginning in Texas, and farmers needing to free up cash, the market is worried that producers will begin dumping their corn stockpiles.

“Farmers have the grain and they need dough,” said John Payne, a senior futures and options broker with Daniels Trading. “What are you going to do, especially if your banker isn’t going to loan you enough money? You’re going to sell.”

— P.J. Huffstutter reports on agriculture and agribusiness for Reuters from Chicago; additional reporting by Colin Packham in Sydney, Michael Hogan in Hamburg and Nigel Hunt in London.

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