Chicago | Reuters — U.S. wheat and soybean futures on Friday touched their highest prices since summer 2018 on expectations for increased Chinese buying as a result of an initial trade deal.
Soybeans closed lower in a retreat from the gains.
The markets continued to focus on prospects for more U.S. sales to China after the countries agreed this month to a ‘Phase 1′ accord to ease their trade war. The dispute for more than a year has slowed shipments of soybeans, sorghum, pork and other agricultural products to China, the world’s top soy importer.
Beijing committed to increasing purchases of U.S. farm goods as part of the trade deal, though details have yet to be announced. China has bought around one million tonnes of European Union wheat so far this season and could now shift to U.S. supplies under the accord.
“You’ve got continued rumours that China’s going to buy both corn and wheat,” said Jim Gerlach, president of broker A/C Trading in Indiana.
The most actively traded wheat futures advanced 7-1/4 cents at $5.56-1/4 a bushel at the Chicago Board of Trade (all figures US$). The contract earlier reached its highest price since August 2018 at $5.61.
Most-active soybeans futures touched the highest price since June 2018 before pulling back as traders booked profits. The contact ended down five cents at $9.41-1/2 a bushel after reaching a session high of $9.50-1/2.
Corn futures rose 1-1/2 cents to $3.90 a bushel and reached their highest price since Nov. 1.
“The market is getting confident that China is going to make meaningful purchases,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.
The U.S. Department of Agriculture in a weekly report said export sales of U.S. wheat last week were 714,900 tonnes, toward the high end of analysts’ expectations for 200,000 tonnes to 900,000 tonnes.
Worries about unfavourable crop weather tightening supplies in rival exporters such as Russia, Ukraine and Australia helped lift wheat futures, traders said.
Expectations that commodity funds will buy wheat futures as they rebalance their portfolios for 2020 also supported prices, they said.
“Concerns of declining world production and lower U.S. acres are driving strength in wheat prices,” U.S. brokerage CHS Hedging said in a note.
A run-up in palm oil prices supported soy prices. Malaysian palm oil futures climbed for a third straight session, as forecasts for lower production and higher domestic consumption boosted prices to a near three-year high.
— Reporting by Tom Polansek in Chicago; additional reporting by Gus Trompiz in Paris and Emily Chow in Shanghai.