U.S. grains: Corn, soy surge as NAFTA revamp outweighs big supplies

CBOT December 2018 corn (in black) and November 2018 soybeans (in green). (Barchart)

Chicago | Reuters — U.S. corn and soybean futures rallied on Monday, reversing the prior session’s steep losses, after the U.S., Canada and Mexico announced they had reached a deal on a trilateral pact to replace NAFTA.

Corn gained nearly three per cent and soybeans more than one per cent as news of the trade agreement, reached over the weekend, eased concerns that the U.S. would exit the North American Free Trade Agreement that has propelled U.S. crop export growth for a quarter century.

The trade news outweighed Friday’s U.S. Department of Agriculture report that showed larger-than-expected stocks of both commodities.

Equities and oil markets also gained and the U.S. dollar climbed as investors assessed the new trade deal, called the U.S.-Mexico-Canada Agreement (USMCA).

“The markets probably expected they would come together and come to agree. So I’m not sure it is a big surprise. But it’s favourable news,” said Rich Feltes, vice-president for research with R.J. O’Brien.

Chicago Board of Trade December corn rose 9-1/2 cents, or 2.7 per cent, to $3.65-3/4 a bushel in the contract’s sharpest gain in six months (all figures US$).

CBOT November soybeans rallied 12-1/4 cents, or 1.4 per cent, to $8.57-3/4 a bushel after earlier touching a 5-1/2 week high.

Wheat futures followed corn and soy higher, although gains were capped by weak export demand. CBOT December wheat ended up 1/2 cent at $5.09-1/2 a bushel.

Ample stocks of corn and soybeans and expectations for a massive U.S. harvest remained headwinds for grains, although worries about harvest-stalling rains across the Midwest underpinned prices.

In its quarterly stocks report on Friday, USDA said soybean inventories stood at 438.1 million bushels as of Sept. 1, an 11-year high. The corn stockpile totaled 2.14 billion bushels, down seven per cent year on year but above expectations.

Soybean supplies have increased as a trade row between Washington and Beijing has slowed U.S. exports to China, the world’s top importer of the oilseed. Last week soybean futures neared a 10-year low on worries over the dispute.

USDA is due to release weekly crop condition ratings and harvest progress estimates after the close on Monday. Analysts, on average, expect corn and soybean conditions to remain stable amid largely favourable Midwest weather.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago; additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris.

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