Headlines:
- US winter wheat area hits lowest since 1909, sending prices higher
Wheat futures touched multi-month highs after the US revealed that its winter sowings of the grain had slumped to the lowest in 108 years, while soybean prices gained on a lower than expected stocks estimate. Soft red winter wheat futures for March surged 2.7% in Chicago at one point, touching $4.30 a bushel, the highest for a spot contract since August. In Kansas City, hard red winter wheat futures reached $4.42 a bushel, a rise of 2.4% and their highest since June. The gains followed the release by the US Department of Agriculture of data showing that US winter wheat sowings had slumped by 3.75m acres year on year to 32.4m acres – the lowest since 1909, the year when Louis Bleriot became the first person to fly across the English Channel. Indeed, the figure “represents the second lowest US [winter wheat] acreage on record”, the USDA said. Area has now fallen by one-half from the record levels seen in the early 1980s.
- China’s levies on DDGs ‘sign of growing rift with US’
China’s hike to import taxes on US distillers’ grains is evidence of a growing rift with the US on ag trading, the US Grains Council said, warning that that “we are less than welcome in their market”. The council – a non-profit export promotion body whose members include top’s agribusinesses such as Archers Daniels Midland, Bunge and Case – said that Beijing’s decision to lift import taxes on US distillers’ grains, or DDGs, was part of a “series of events that is a severe departure” from previous relations. Chinese importers of DDGs will, for five years starting on Thursday, pay an anti-dumping duty of 42.2-53.7%, plus an 11.2-12% anti-subsidy tax – up from rates of 33.8% and 10-10.7% respectively imposed in September, amid claims by Beijing of dumping by the US. However, the complaints are “not supported by the evidence and raise serious questions regarding… compliance with China’s international obligations,” the council’s chief executive, Tom Sleight said, adding that the duty was part of a trend of growing detachment in relations.
Summary:
Earlier in the week we had some clients that were interested in shorting Soybean futures. Our suggestion was to hold off until the results of today’s USDA report could be digested in the markets. It was our view that Soybean was oversold on the technical chart and that and move to the upside was possible. Additionally, we thought that even though Corn was in an overbought position that there was some room for it to move a little higher. Despite some early disappointing export sales numbers the USDA set the stage for a potentially bullish landscape for the grain markets.
Soybean futures was the biggest winner today. It finished the day up 28 cents (almost 3%). Wheat followed next with an almost 2% gain of 7.25 cents. Then finally, Corn which was under pressure for most of the day managed to eke out a small gain of ¾ cents. The USDA reported stocks levels that were surprisingly low and it also announced Winter Wheat sowings that were below trade expectations. The effects of the round of poor export sales numbers that were announced prior to the WASDE were short lived once the trade took in the WASDE information.
