U.S. grains: Wheat sets two-week low on supplies, trade jitters

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — U.S. wheat futures touched a two-week low on Friday on plentiful domestic and world supplies and a firmer dollar, which tends to make U.S. grains less competitive, traders said.

Corn and soybean futures posted modest declines, with fears of a trade war with Mexico hanging over the grains complex.

Chicago Board of Trade March wheat settled down 6-1/2 cents at $4.20-1/2 per bushel (all figures US$). March corn finished down 1-1/4 cents at $3.62-1/2 a bushel and March soybeans ended down 1/4 cent at $10.49-1/4.

Wheat fell the most, with the March contract setting a two-week low at $4.19-1/4 before paring losses. The contract is down nearly four per cent since Jan. 17, when it hit a 2-1/2-month high on concerns about a larger-than-expected drop in U.S. winter wheat plantings.

“We are looking at fewer acres, but also we are looking at record global stocks. We are going to have to get through this supply before we see speculators come back,” said Ag Watch Market Advisors president Dewey Strickler.

Wheat and corn futures also faced pressure this week from rising political tension between the U.S. and Mexico, a major importer of U.S. grain.

U.S. President Donald Trump said he had a friendly phone call with Mexico’s president on Friday but asserted he will renegotiate trade deals and other aspects of the countries’ ties.

On Thursday, Mexican President Enrique Pena Nieto scrapped a planned trip to Washington to meet Trump, who has repeatedly demanded that Mexico pay for a wall on the U.S. border to halt illegal immigration. Mexico insists it would not pay for the wall. The White House later said the potential 20 per cent tax could be used to pay for the wall.

Mexico was the top buyer of U.S. corn in the 2015-16 marketing year and the No. 2 buyer of U.S. wheat, according to U.S. Department of Agriculture data.

“It is hard to understate how negative Trump trade policies could be for wheat, given the ongoing availability of multiple origins to supply food cereals to the world,” ED+F Man Capital analyst Charlie Sernatinger said in a note to clients.

Soybean futures closed narrowly mixed, with the spot March contract marginally lower. For the week, soybeans fell 1.7 per cent as improved weather bolstered yield prospects for the South American soy harvest.

Traders were monitoring the harvest in Brazil’s top-producing state of Mato Grosso, where rains have slowed the pace of fieldwork.

— Julie Ingwersen is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Colin Packham in Sydney.

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