High Prices Of US Grain Exports Weigh On Futures

High Prices Of US Grain Exports Weigh On Futures

The rising prices in agro-commodities supplies in the export market directly led to chilling demand from overseas buyers. This resulted in the fall of U.S wheat futures. 

The United States is one of the biggest producers of wheat in the world. Therefore, any fluctuations in the supply chain directly affect the global market and the domestic futures trades. According to the U.S. Department of Agriculture’s (USDA) weekly Export Sales Report, total known outstanding sales and accumulated exports of all classes of wheat for the 2022-23 marketing year, through October 13, 2022, was 11.2 million metric tonnes (MMT), 8 percent lower than last year’s 12.3 million metric tonnes. 

Net sales of 163,100 metric tons were reported for delivery in 2022-23, 8 percent less than the previous week’s 211,800 MT and below trade expectations of 200,000 to 500,000 MT. Increases were reported for Mexico (52,482 HRW, 704 SRW, 40,348 HRS), Nigeria (36,000 HRS), Algeria (31,500 durum), Japan (9,883 HRW, 17,044 HRS, 251 white) and Colombia (18,700 HRS). 

The United States Department of Agriculture (USDA) forecasts 2022-23 U.S. Wheat Exporters to a total of 21.09 million metric tonnes. The US has been able to fulfill 54% of the total projected exports of wheat and wheat products in the year so far. 

Chicago Board of Trade grain and soybean futures strengthened on Wednesday as weakness in the U.S. dollar raised hopes for improved export demand for American crops. 

The Fluctuations in Dollar Compounded to the Issue

The Federal Reserve increased the interest rates a while back leading to an appreciation in the dollar. However, the most traded currency i.e. dollar, fell near a three-week low versus major peers after poor U.S. economic data reinforced speculation that the Federal Reserve will slow its interest rate hikes. 

A softer dollar makes U.S. commodities look more attractive to importers on the global market. The importers get to buy the commodity at a lower exchange rate allowing them to get more profit margins once the dollar regains strength. 

Owing to a weaker dollar, the benchmark Chicago Board of Trade December soft red winter wheat futures contract (WZ2) settled 8-1/4 cents lower at US$8.41-1/4 a bushel after hitting technical resistance at its 40-day moving average. K.C. hard 

red winter wheat December futures (KWZ2) fell 2-3/4 cents to US$9.41-3/4 a bushel and MGEX December spring wheat (MWEZ2) dropped 2-3/4 cents to US$9.53-1/4 a bushel. 

Forecasts of Rain 

There have been forecasts for showers in the eastern U.S Midwest and the Argentine region is expected to aid the developing crops. This eased some worries for the farmers in the wheat-growing areas that are currently suffering from unfavorable dryness. 

“Low water levels on the Mississippi River have shifted U.S. crop exports during the peak export season from Gulf Coast facilities to the Pacific Northwest and South American ports”, said Greg Heckman, chief executive of grain trader Bunge Ltd.

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