Wheat trades higher amid US output downturn, fresh Russia-Ukraine tensions

Wheat surged towards a second monthly gain as concerns over supply disruption from the Black Sea region, lower harvest in the US, and adverse weather in key exporting countries lent support to the commodity.

At the close of the week, the most-active wheat contract on the Chicago Board of Trade (CBOT) rose 4.5 percent, its highest valuation since June 29. It also rose over 8 percent in September to record a consecutive increase in two months.

The U.S. Department of Agriculture (USDA) attributed the hike in wheat to a “smaller-than-expected” output in the U.S. in the 2022 season as dry soils in western growing areas cut into yields, leading to poor harvests in many farmlands.

In its annual Small Grains Summary report, USDA pegged the U.S. wheat crop at 1.650 billion bushels, about 133 million bushels below the government’s estimated wheat production of 1.783 billion bushels in August.

USDA also said that wheat used during the quarter ended Sept. 1 was 543 million bushels, down 24 percent from a year earlier.

The disappointing U.S. wheat crop, considered the second-smallest in the last 20 years, exacerbated worries about global grain inventories as harvests from other major crop producers also came in lower than initially expected.

As traders adjusted positions to reflect the lowered production view, the U.S. agriculture department noted that the overall balance sheet was still tight at a time when export disruptions stemming from Russia’s invasion of Ukraine have left buyers scrambling to find grain.

In another upward movement, corn also found support from tighter-than-expected stocks, with the USDA pegging corn stocks at 1.377 billion bushels, down from trade expectations of 1.512 billion bushels

CBOT corn was up 8 cents to $6.77-1/2 per bushel, after climbing to $6.96-1/4, its highest since Sept. 21.

Market dealers observed that rising Russia-Ukraine tensions supported wheat and corn futures as Russia’s planned annexation of occupied parts of Ukraine kept attention on the risk of fresh disruption to vital Black Sea grain trade.

Tensions were also heightened by a leak from Russian gas pipelines to Europe, raising doubts about whether a United Nations-supervised shipping corridor for Ukrainian grain would last.

On the other hand, soybean futures plunged into bearish territory after the USDA upgraded its stocks assessment to 273.76 million bushels, significantly higher than the average trade expectations of 242 million bushels.

Soybeans was down 46 cents to trade at $13.64-3/4 per bushel, its lowest since August 4, logging a 4.28 percent weekly decline, its biggest fall since the week ended June 24, 2022.

Traders also expressed concerns that dry conditions in parts of the U.S. Plains and Argentina could threaten production.