In a history-making race this autumn between wheat and soybeans to reach $10 a bushel, the traders who bet on beans won in the week ended September 28. But by Friday’s close, wheat was getting a second wind.
The spot, or front-month, Chicago Board of Trade November soybeans rose as high as $10.17-3/4, the highest price for a spot futures contract in three years, before ending the week at $9.91-1/4 on profit-taking on Friday after USDA data.
Soybeans bounced on the strength in all commodities, including wheat. Worries about grain supplies, strong export demand for all U.S. grains amid the record lows in the dollar and China easing grain import rules, and rising domestic prices sent all CBOT grain commodities flying.
Meanwhile, CBOT spot wheat — the grains leader most of the summer — resumed its march toward $10 with a series of all-time highs, peaking on Friday when it reached $9.61-3/4. It closed at $9.39, up 6 cents on the day.
Before this summer, the CBOT record wheat price in more than a century of trading was $7.50 a bushel.
Wheat was firm all week but got a finishing boost on Friday from the the U.S. Agriculture Department.
In its annual report on small grains production issued early on Friday morning, USDA shaved another 47 million bushels from its U.S. 2007 wheat production estimate, putting it at 2.067 billion bushels.
At the same time, wheat stocks are shrinking. USDA said in its quarterly grain stocks report that U.S. wheat stocks fell 806 million bushels since June 1, more than 25 percent faster usage than in the same period a year earlier.
Wheat eked out a gain but corn and beans weren’t so lucky in the face of active end-week and end-quarter profit-taking by hedge funds and other hot money. USDA stocks data for corn and soy was also bigger than expected, triggering the selling.
But next week volatility should continue with wheat the focus and once again the expected market leader, traders said.
The biggest factor wheat traders will be watching is Australian crop weather. Australia — usually number 2 behind the U.S. in wheat exports — has seen its crop once more shrink with drought and little rain in sight. CBOT traders are now talking a 10-12 million tonne crop, down from the Australian government’s last number of 15.5 million tonnes of Sept. 18 — and from the 22.5 million tonnes once predicted.
In the soybean pit, the area of concern is Mato Grosso, Brazil, the top soy state in that huge producer.
Hot, dry conditions have been delaying early soybean planting with no significant rainfall expected until Oct. 7.
Any fresh export demand will likely spur additional buying in the Chicago markets. Supply worries, and the weak dollar, have fed voracious foreign buying of U.S. grain stocks.
There does not yet appear to be any sign of rationing as the world’s biggest importers of food and feed continue to book huge amounts of corn and wheat even at historically high prices. Week after week export sales have been at well over 1.0 million tonnes in both.
The U.S. corn harvest is advancing rapidly with the Midwest weekend expected to be active given clear, warm conditions. Truck dumps will be open at hundreds of elevators.
That added to some commercial prehedging on Friday. But the hot fund speculative money in corn and soybeans was a ready absorber of such selling pressure most of the week.
Traders have also been especially interested in hearing the latest on soybean yields. Early yields were disappointing and later reports have been mixed.
Soybeans are usually harvested before corn to prevent crop losses and allow corn to bring moisture levels down “on the husk.” Stronger stalks allow wind-drying in fields, saving farmers money on drying or on paying penalties to merchandisers for delivering corn above 15.5 percent moisture.
But this year the push has been to harvest corn first, especially in the drought-plagued South and mid-South.
A last weather factor will be the interest in U.S. winter wheat planting progress. Concern is already there because seeding lags on dryness in the central Plains — Kansas is the top wheat state. But concerns were also cited about the southern Midwest and northern Delta where soils are parched.
The assumption has been that farmers will chase $10 wheat prices and create an orgy of wheat planting that could cost both corn and soybeans acreage next spring, notably in regions where winter wheat cannot be harvested by June, preventing any “double-cropping” of soybeans.
USDA will issue its next crop progress update on Monday afternoon after 1600 ET/2000 GMT.
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