Wheat Futures Higher on Potential End to Trade Deal — Daily Grain Highlights
By Kirk Maltais
— Wheat for September delivery rose 3.2% to $6.60 a bushel on the Chicago Board of Trade on Friday as traders added risk premium to futures as Russia and Ukraine enter the weekend with no new extension to the Black Sea grain deal.
— Corn for December delivery rose 2.8% to $5.14 1/4 a bushel.
— Soybeans for November delivery rose 0.2% to $13.73 a bushel.
HIGHLIGHTS
Deal Risk: Traders are putting more stock into the idea of Russia stepping away from the Black Sea grain export deal, this after threatening to do so multiple times since the deal was reached a year ago. The agreement is set to expire July 18, and traders are again mulling the possibility of Russia leaving it.
“We suspect that Russia could let the deal lapse this time in an effort to have its demands met,” said Caroline Bain of Capital Economics in a note. “After all, it has already been dragging its feet on processing exports, which have dropped off in recent weeks.”
If the deal is canceled the expected stress on export availability is expected to lift grain futures, Bain said.
Temporary Pullback: Grain futures on the CBOT were solidly higher in pre-market trading, but pared back for part of the day before resurging at the finish. Traders balanced the effect of Russia potentially leaving the Black Sea grain deal along with scattered rainfall forecasts for the Plains and Midwest this weekend going into next week. Traders re-added that risk premium before the close of trading.
INSIGHT
Potential Failure: Wednesday’s WASDE appeared to leave the U.S. corn supply picture relaxed, but analysts foresee possibilities that could reintroduce tightness.
“I am frequently asked what factors should we watch for that could change that outlook, and I point to two possibilities — A much smaller U.S. crop than currently anticipated and/or a crop failure in China,” said Arlan Suderman of StoneX in a note.
He added that while both are possible, neither is currently seen as likely at this point.
“China does have weather stresses this year, but thus far we don’t see evidence of enough losses to create an import boom,” he said.
Surge Slowdown: The breakneck pace of growth for the average price of an acre of farmland is slowing, with a return to form unlikely as lending rates rise and crop prices fall. In a report published this week, farm-management firm Farmers National said that beginning in the fourth quarter of 2022, the slower pace of the housing market started to impact prices realized for farmland acres, with the volume of property sold and its value both reducing their speed of growth.
Farmland values are now at a record high, said Paul Schadegg, senior vice president of real estate operations for Farmers National.
AHEAD
— Cal-Maine Foods is scheduled to release its fourth-quarter earnings report on Monday.
— The USDA is due to release its weekly grain export inspections report at 11 a.m. EDT Monday.
— The USDA is scheduled to release its weekly crop progress report at 4 p.m. EDT Monday.
Write to Kirk Maltais at kirk.maltais@wsj.com
