(Businessweek) – Wheat touched an eight-month low in Chicago on speculation that a snowstorm in the U.S. Great Plains will help ease drought conditions before crops emerge from winter dormancy.
Parts of Kansas, Oklahoma and Texas were under a blizzard warning today, with some areas expected to receive more than a foot (30 centimeters) of snow, according to the National Weather Service. While much of the central to northern Great Plains was under moderate to exceptional drought as of Feb. 19, according to the U.S. Drought Monitor, central Oklahoma northward already has snow cover from recent storms, Weather Service data show.
“A snowstorm in the U.S. Midwest has significantly increased the snow cover in the winter wheat growing areas, which should considerably improve moisture levels in the soil when the snow melts in spring,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in an e-mailed report. “The winter wheat plants are in very poor condition due to the prolonged period of drought.”
Wheat for delivery in May slid 0.5 percent to $7.1525 a bushel at 5:50 a.m. on the Chicago Board of Trade. The grain reached $7.1375, the lowest price for a most-active contract since June 25. In Paris, milling wheat for delivery in May fell 0.6 percent to 236 euros ($313) a metric ton on NYSE Liffe.
Kansas, Oklahoma
U.S. wheat production may drop 7.4 percent this year to 2.1 billion bushels as yields decline to 45.2 bushels an acre from 46.3 bushels, the U.S. Department of Agriculture projected on Feb. 22. Kansas and Oklahoma were last year’s biggest U.S. growers of winter wheat, usually planted in the Plains beginning in September. The crops will emerge from dormancy in the next month before harvesting starts in June.
Soybeans rose in Chicago, extending last week’s advance, on signs China is boosting purchases of U.S. supplies as a shipping backlog delays exports from Brazil.
China bought 410,000 tons of U.S. soybeans, the USDA said in a report Feb. 22. Ports in Brazil, expected to overtake the U.S. as the world’s largest shipper, have 192 vessels waiting to load oilseeds and grains, more than double the year-earlier 90, researcher SA Commodities said Feb. 22. The Brazilian soybean harvest is 27 percent complete, ahead of last year’s 20 percent pace, and may total 81.2 million tons, researcher AgRural said.
Chinese Demand
“China is still importing,” said Tetsu Emori, a commodity fund manager at Tokyo-based Astmax Investment Management Inc., which manages about $700 million. “As soon as prices decline, the Chinese will come in to buy.”
Soybeans for delivery in May added 0.3 percent to $14.475 a bushel. Trading volume was 88 percent higher than the 100-day average for that time of day. China is the world’s biggest importer of the oilseed, which climbed 2 percent last week.
Futures fell 1.8 percent on Feb. 22 after the USDA said farmers in the U.S. will expand soybean sowing, taking the next harvest to an all-time high of 3.4 billion bushels and doubling inventories by Aug. 31, 2014. Corn production may rebound to a record 14.53 billion bushels, up 35 percent from the previous year’s drought-reduced crop.
Corn for delivery in May was little changed at $6.845 a bushel. The grain fell as much as 0.4 percent and climbed as much as 0.5 percent.
