Wheat Futures Extend Slide Amid Coronavirus Concerns
February 28 2020 - 4:30PM
Dow Jones News
By Kirk Maltais
--Wheat for May delivery fell 0.5% to $5.25 a bushel on the
Chicago Board of Trade on Friday, responding to mass selling in
commodities and equity markets as the spread of the coronavirus
threatens to upend economies. The most active contract was down
4.3% for the week.
--Soybeans for May delivery lost 0.3% to settle at $8.92 3/4 a
bushel.
--Corn for May delivery rose 0.1% to $3.68 1/4 a bushel.
HIGHLIGHTS
Ungraceful Exit: Managed money traders have reportedly offloaded
a large portion of their wheat contracts, driving futures lower.
"The trade will be looking for large specs to have sold net some
28,000 lots of wheat on tonight's [CFTC Commitment of Traders]
report," said Charlie Sernatinger of ED&F Man Capital. By
comparison, hard red wheat and soft red wheat had a net long
position of 72,949 contracts for the week ended Feb. 18, according
to the CFTC's last report. In the longer term, a weak wheat price
will likely prompt farmers to plant less of it this spring, Mr.
Sernatinger said.
Coronavirus Consequences: Grains futures shed more value Friday
in response to global equity markets dropping below correction
thresholds. This has some traders questioning the promised benefits
of the phase one trade deal with China. "We can't help but wonder
if the spread of the coronavirus will give the Chinese the excuse
to hold off buying," says Tomm Pfitzenmaier of Summit Commodity
Brokerage.
INSIGHT
The Biggest Loser: Soyoil futures on the CBOT are down about 17%
for the year, more than double soybeans' slide of about 6.6%. The
main driver for the loss is the continued liquidation of Malaysian
palm-oil futures, according to AgResource, which have fallen for
most of February on concerns about the coronavirus's impact on
demand for cooking oil. Soyoil for May delivery ended down 1.8% at
28.68 cents per pound.
Spring And A Young Trader's Fancy: As the start of the spring
planting season approaches, traders are likely to shift their focus
from the old crop to the new, Karl Setzer of AgriVisor said. This
change in focus may spark a turnaround in grains futures, Mr.
Setzer said, with traders adding a risk premium to futures in the
event of adverse weather.
Ethanol in the USDA's Tank: The USDA aims to increase its fleet
of vehicles able to drive on either gasoline or ethanol. Such
flexible-fuel vehicles already make up more than half of the USDA's
vehicles used for food safety inspections, agricultural research
programs and other enforcement tasks, but the USDA predicts this
and other measures have the potential to increase its annual
consumption of E85 by 10 million gallons and of E15 by nine million
gallons. That's just a drop in the barrel for U.S. ethanol
consumption, however, which totaled 14.4 billion gallons in 2018,
according to EIA stats.
AHEAD
--The USDA releases its weekly grain export inspections data at
11 a.m. ET Monday.
--The USDA releases its monthly grain crushings report and
annual summary at 3 p.m. ET on Monday.
--The EIA releases its weekly update on ethanol production and
inventories at 10:30 a.m. ET Wednesday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
February 28, 2020 16:15 ET (21:15 GMT)
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