MarketsFarm — Strong global demand, paired with concerns of dry growing conditions in key regions, has spurred U.S. wheat prices higher.
“Some countries are getting nervous with the persistent dryness in several regions, which could reduce the supply of quality global wheat,” said Terry Reilly of Futures International in Chicago.
Dry growing conditions in Ukraine, Kazakhstan, Russia and Argentina had sparked concerns of a possible shortage of milling wheat during the first half of 2021, he noted.
“Major importers are getting ahead on boosting reserves, just in case.”
U.S. wheat futures are expensive compared to the rest of the world, with the nearby Minneapolis spring wheat contract closing at $5.82 per bushel on Wednesday (all figures US$).
However, Russian wheat is also hitting three-year highs, prompting importers to look to the U.S., Argentina and Australia.
Foreign demand has also propped up soybean prices lately, with the January contract closing at $10.71 per bushel on Wednesday.
Reilly mentioned the slow pace of South America’s soybean planting as a supportive factor for U.S. soybeans, as the region grapples with widespread dryness.
Argentina’s crush activity has also slowed down considerably in recent weeks, which was supported the U.S. soymeal market.
“That’s created a bull market in soymeal, which is supporting soybeans,” Reilly said.
As Brazil’s soybean exports potentially outpaced their supply last year, there are “renewed hopes” that Brazil will turn to the U.S. for soybean imports in the coming months. A lower U.S. dollar has also made exports more attractive to foreign buyers.
“A lower dollar has supported commodity markets in general,” Reilly said.
— Marlo Glass reports for MarketsFarm from Winnipeg.