Wheat Futures Rise on Geopolitics — Daily Grain Highlights

By Kirk Maltais

--Wheat for December delivery rose 0.9% to $5.79 1/4 a bushel on the Chicago Board of Trade on Wednesday, in reaction to Ukraine advancing in Russian territory - which is reintroducing risk premium tied to the Black Sea.

--Soybeans for November delivery rose 0.4% to $10.00 3/4 a bushel.

--Corn for December delivery rose 0.2% to $4.05 a bushel.

HIGHLIGHTS

Reintroduced Risk: Heightened activity in the Russia-Ukraine war, with Ukraine making progress in Russian territory, has traders worried about the potential issues befalling exports out of the Black Sea region. "Wheat is very sensitive to geopolitics," said Brady Huck of Advance Trading. "Money seems to be looking for the best place to go as things change." Wednesday marks the third session that most-active wheat futures finished higher.

The Aftermath: The performance of Vice President Kamala Harris in her debate against former president Donald Trump last night helped ease trader concerns about a potential Trump victory leading to increased tariffs on China. Memories of the tariff war between the U.S. and China--and its adverse effect on U.S. agricultural export sales--linger among traders, said AgResource in a note. "Soybean traders remember the early days of the 2018 trade war with China and its lackluster U.S. soybean demand until the Phase 1 trade deal was signed in 2019," said the firm.

Prep Work: The September WASDE is expected to show that bumper crops are anticipated to be produced in this year's fall harvest, but hot weather that hit many growing areas in recent weeks could pare the size of these crops -- at least some traders believe, said Brian Pullam of Linn & Associates. "I think a lot of traders last week started getting prepared for bullish data out of the WASDE tomorrow," Pullam said. This potential was a source of support for futures today.

INSIGHT

Rigid Range: Room to run in grain futures is seen as limited ahead of the release of the WASDE report. "Harvest always makes it difficult to sustain rallies and that will be especially true this year with a near record crop expected," said Tomm Pfitzenmaier of Summit Commodity Brokerage in a note. How the USDA moves its projections in tomorrow's report will be the key determinant for the direction and momentum of grains following the report's publication.

Looking for the Next Thing: Tomorrow's WASDE is expected to show a move higher for soybean production and yields, along with higher production but slightly lower yields for corn. Unless the report delivers a major surprise on the supply front, traders may quickly pivot off trading on the WASDE report and onto other factors. "If USDA confirms this belief tomorrow the focus moves to U.S. demand and South American news," said Rich Nelson of Allendale Inc.

Barrel Buildup: Inventories of ethanol in the U.S. surged from the previous week, according to the EIA's latest weekly report. Ethanol inventories for the week ended Sept. 6 totaled 23.71 million barrels, up 360,000 barrels from the previous week. This puts stocks on the high end of estimates from analysts surveyed by Dow Jones this week. Average daily production also rose, climbing 19,000 barrels a day to 1.08 million barrels a day. It's more than the 1.05 million barrels to 1.072 million barrels a day expected by surveyed analysts.

AHEAD

--The USDA will release its weekly export sales report at 8:30 a.m. ET Thursday.

--The USDA will release its monthly World Agriculture Supply and Demand Estimates report at noon ET Thursday.

--The CFTC will release its weekly Commitment of Traders report at 3:30 p.m. ET Friday.

Write to Kirk Maltais at kirk.maltais@wsj.com

(END) Dow Jones Newswires

September 11, 2024 15:32 ET (19:32 GMT)

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