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U.S. grains: Wheat ends up three per cent

Commodities seen as undervalued relative to equities

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — U.S. wheat futures climbed about three per cent on Wednesday on a mix of technical buying and enthusiasm over a larger-than-expected wheat purchase by top global importer Egypt a day earlier, traders said.

Corn and soybeans also rose, supported by fund investment at the start of a new month and carry-over buying from Tuesday’s surge.

Chicago Board of Trade May wheat settled up 13-1/4 cents at $4.57 per bushel (all figures US$). CBOT May corn ended up 8-1/4 cents at $3.82 a bushel and May soybeans rose 16 cents at $10.51-3/4 a bushel.

Wheat posted the biggest advance by percentage, buoyed by news on Tuesday that Egypt’s main state wheat buyer, the General Authority for Supply Commodities (GASC), bought 535,000 tonnes of wheat at an international tender. The purchase was GASC’s largest since January 2014.

“We look at the surge in Egypt’s buying interest as bullish for EU and K.C.-type wheat prices, and look for appreciation in futures in the short term,” said Terry Reilly, senior commodities analyst with Futures International.

Additional support stemmed from forecasts for potentially stressful dry and warm conditions to persist in the southern U.S. Plains winter wheat belt.

“Plains wheat lacks rain this month, with moisture draw-down to hamper growth in last half of March,” the Commodity Weather Group said in a note to clients.

Wheat, corn and soybeans drew support from views that commodities were undervalued relative to equity markets. The 19-market Thomson Reuters CoreCommodity CRB Index rose 0.3 per cent on Wednesday while the Dow Jones Industrial Average rose 1.4 percent and crossed the 21,000 mark for the first time.

“You’ve already got the ratio between the Dow and CRB index at an all-time high, and every day it gets worse, in favour of equities. People notice,” said Jim Gerlach, president of Indiana-based A/C Trading.

Corn and soyoil futures also drew follow-through support from Tuesday, when both markets rose on reports of changes to U.S. government policy that could lift U.S. biofuel production. Corn is the primary U.S. feedstock for ethanol while soyoil is used in biodiesel.

However, gains were capped by a lack of confirmation from the Trump administration about any changes to the U.S. biofuels program.

“Soybeans and corn are still seeing support today from the reports on Tuesday about possible changes in U.S. biofuel regulations by the Trump administration,” said Matt Ammermann, commodity risk manager at INTL FCStone.

— Julie Ingwersen is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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