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Wheat Rises on China Buying US Agriculture, Global Output Slump

October 11, 2019 at 12:49 by Andrew Moran

Wheat futures are rising to finish the trading week, driven by new data that found China purchased huge volumes of US agriculture, including wheat, soybeans, and pork. Other global industry factors are contributing to wheat’s performance in recent trading sessions, mainly from a supply-side perspective.

December wheat futures rose $0.0225, or 0.46%, to $4.9525 per bushel at 12:41 GMT on Friday on the Chicago Board of Trade (CBoT). The agricultural commodity will record a weekly gain of nearly 1%, paring its year-to-date loss to under 2%. But prices have enjoyed a considerable 2.5% boost in the last month.

According to the US Department of Agriculture (USDA), China purchased 130,000 metric tons of wheat, 2.09 million metric tons of soybeans, and 142,000 tonnes of pork in the week ending October 3. This was part of Beijing’s efforts to show good faith ahead of this week’s principal-level US-China trade negotiations in Washington.

While wheat has not been as impacted by the trade war as soybean, it has still endured the pain of tit-for-tat retaliatory tariffs. Since Beijing slapped levies on US wheat exports in March 2018, American farmers have only exported approximately 40,000 metric tons of wheat (hard and soft) to private buyers.

Is the start of a beautiful friendship again? Industry leaders certainly hope so.

Meanwhile, supplies and output are trending downward. Argentina, the sixth-largest wheat exporter, is projected to see its wheat crop in the 2019–2020 marketing season fall from 21 metric tons to 18 metric tons. This was echoed by Buenos Aires Grain Exchange, which forecasts production will tumble to 19.8 million metric tons. The decline is being attributed to dry weather conditions in key wheat regions.

Zimbabwe will most likely witness its output plunge by two-thirds as the southern African nation grapples with the worst drought in four decades and a severe power shortage. This year, Zimbabwe is estimated to produce 60,000 tons, down from the roughly 160,000 tons last year.

Australia is also prognosticating a decrease in output as crops have faced parched conditions.

However, France has seen its wheat sentiment improve, forecasting exports outside of the eurozone will top 11.7 million tonnes, up from 11 million tonnes last month.

In other agricultural markets, December corn futures climbed $0.04, or 1.75%, to $3.8425 a pound. November soybean futures added $0.0725, or 0.79%, to $9.3075 a bushel. January orange juice futures tacked on $0.009, or 0.9%, to $1.0135 per pound.

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