Chicago | Reuters — U.S. wheat futures surged 4.5 per cent on Tuesday, their biggest gain since May, as cuts to the harvest outlook in Australia bolstered prospects for U.S. exports, traders said.
The rally in wheat, which closed near session highs as technical buyers entered the market after the early strength, underpinned the corn market. Soybean futures ended lower as a lack of new Chinese purchases outweighed signs of strong domestic demand.
Chicago Board of Trade March soft red winter wheat ended up 24 cents at $5.66-3/4 a bushel (all figures US$). K.C. hard red winter wheat and MGEX spring wheat futures also were sharply higher, with both hitting their highest since late January.
“It was the algo traders,” said Arlan Suderman, chief commodities economist at INTL FCStone. “Once momentum trading started adding volume behind the early gains, it blew higher.”
Australia said on Tuesday its 2019-20 wheat harvest was sharply below expectations as severe drought wilted crops.
With harvesting now complete, Australian agricultural agency ABARES said the crop totaled 15.17 million tonnes – the lowest since 2008.
CBOT March corn futures settled up 5-1/4 cents at $3.83 a bushel.
China said on Tuesday it would grant exemptions on retaliatory import duties imposed on 696 U.S. goods, as Beijing seeks to fulfill commitments made in its trade deal with Washington.
Tuesday’s announcement comes after the Phase One trade deal between the two countries took effect on Feb. 14 and is the third round of tariff exemptions China has offered on U.S. goods.
But traders were waiting for clear signs that China has increased its purchases of U.S. soybean before pushing prices higher.
A U.S. Agriculture Department report on Tuesday morning showed that export inspections of soybeans totaled 992,294 tonnes in the week ended Feb. 13. That included 203,165 tonnes bound for China, down from 404,420 tonnes a year ago.
CBOT March soybeans were 1-1/2 cents lower at $8.92-1/4 a bushel.
“Large Chinese purchases of U.S. soybeans and other grains have not taken place since the deal signing, but market expectations remain that the Chinese buying will probably start soon,” brokerage Allendale said in a note to clients.
Traders shrugged off a National Oilseed Processors Association report that showed its members crushed a record 176.94 million bushels in January.
Massive harvest expectations for South America also added pressure to soybeans.
Brazil’s 2019-20 soybean crop is expected to reach a record 125.6 million tonnes, consultancy AgRural said on Monday.
— Mark Weinraub is a Reuters commodities correspondent in Chicago; additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore.