U.S. grains: Corn, soy to one-month lows

CBOT March 2020 corn with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters –– U.S. corn and soybean futures hit one-month lows on Thursday and wheat futures followed amid doubts about whether China will make the purchases from the United States promised in a trade deal between the two countries, analysts said.

Chicago Board of Trade March corn futures tumbled three per cent, settling down 12 cents at $3.75-1/2 per bushel after dipping to $3.75-1/4, the contract’s lowest since Dec. 12 (all figures US$).

The March soybean contract ended down 4-3/4 cents at $9.24 after hitting $9.22, its lowest since Dec. 13.

CBOT March wheat finished down eight cents at $5.65-1/4 a bushel, retreating from a one-year high set a day earlier.

U.S. cattle and lean hog futures also declined as brokers digested the U.S.-China trade deal that was signed on Wednesday.

“It’s just skepticism over China complying with the trade deal,” Dan Cekander, president of DC Analysis, said of the broad sell-off across agricultural markets.

Under terms of the pact, China committed to increase purchases of U.S. farm products by $32 billion over two years, including $12.5 billion above the corresponding 2017 baseline of $24 billion in 2020 and $19.5 billion above the baseline in 2021.

However, China’s pledge to buy U.S. agricultural goods based on “market conditions” added to doubts about the size of any future purchases.

“These phrases … are seen as trap doors, potentially, that China can use,” said Rich Feltes, vice-president for research with R.J. O’Brien.

“Having said that, the larger issue is (that) we are in a better place today with China than we were six months ago,” Feltes said.

CBOT grains showed little reaction Thursday as the U.S. Senate approved a revamp of the 26-year-old North American Free Trade Agreement. The legislation for the U.S.-Mexico-Canada Agreement passed on a bipartisan vote, sending the measure to President Donald Trump for him to sign into law.

Mexico is a major buyer of U.S. corn, soybeans, sorghum and wheat.

Traders also shrugged at better-than-expected weekly U.S. export sales. The U.S. Department of Agriculture reported export sales of U.S. 2019-20 corn in the week ended Jan. 9 at 784,700 tonnes and 2019-20 wheat at 650,600 tonnes, topping trade expectations.

Weekly soybean sales were in line with expectations at 711,400 tonnes.

Corn futures faced pressure from favourable South American crop weather bolstering expectations for large harvests, and poor profit margins for U.S. producers of corn-based ethanol fuel, Cekander said.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Nigel Hunt in London and Naveen Thukral in Singapore.

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