U.S. grains: Futures weaken as Iraq strike rattles markets

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

Chicago | Reuters — U.S. grain and soybean futures crumbled on Friday as traders booked profits after being spooked by a U.S. air strike in Iraq that escalated geopolitical tensions in the Middle East.

The strike that killed Iran’s most prominent military commander put markets on edge and opened the door for a setback a day after most-active soybean and wheat contracts each hit 2018 highs, traders said. Wall Street’s major indexes also fell, while hog futures sank by their daily trading limit.

“When in doubt, get out,” said Jim Gerlach, president of commodities broker A/C Trading in Indiana.

The Chicago Board of Trade’s most-active soybean contract dropped 1.6 per cent to $9.41-1/2 a bushel (all figures US$). The decline came after the most-active contract on Thursday touched its highest price since June 2018.

Wheat slumped 0.9 per cent to $5.54-1/2 a bushel at the CBOT, after the most-active contract reached its highest price since August 2018 on Thursday. Corn slid 1.5 per cent to $3.86-1/2 a bushel.

Analysts said they expected the markets would soon shift their focus from tensions in the Middle East back to an initial U.S.-China trade deal and the release of U.S. Department of Agriculture (USDA) crop data next week.

“We’ve had a good run, and sometimes the markets are looking for an excuse and I think they found one,” Gerlach said.

Traders are waiting for USDA to issue crop production data on Jan. 10 amid uncertainty about the size of last year’s corn harvest, which was delayed by cold, wet weather. They also want to see how the agency adjusts forecasts for crop exports to China, after Washington and Beijing struck a Phase One trade agreement last month.

China committed to buying more U.S. farm products as part of the deal, although it has not been signed and details have not been announced. China, the world’s top soybean importer, slashed purchases of U.S. farm goods during the countries’ trade war and bought soy from South America instead.

USDA said total U.S. soybean export sales last week were 332,047 tonnes, below analysts’ expectations for 350,000 tonnes to 1.05 million tonnes. China bought 160,241 tonnes for 2019-20 delivery, including about 132,000 tonnes switched from unknown destinations.

Weekly U.S. corn export sales of 539,991 tonnes were within analysts’ estimates, while wheat sales of 333,250 tonnes were toward the low end of expectations.

There are “ideas the wheat market has run out of gas for the moment,” brokerage CHS Hedging said.

Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris.

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