Iran-US deal hopes send oil lower, weighing on wheat too
• US winter wheat condition rating falls to match 30-year low
• Wheat prices fall nonetheless, weighed by harvest pressure and oil
• Crude oil sapped by report on proposal for Iran-US deescalation
• Funds believed to be rebuilding net short in Chicago wheat
Wheat prices slid on both sides of the Atlantic, undermined by mounting talk of harvest pressure, besides by a fall in crude oil prices on an Iranian report viewed as signalling progress on ending war with the US.
Iranian state television said it had seen a draft of an unofficial framework for a deal with the US on ending the Iran war and reopening the Strait of Hormuz.
Brent crude traded down 3.6% in late deals, dipping below $96/Bbl for the first time in more than a month.
Earlier, Brent crude fell to $94.16/Bbl, although pared losses after the White House said that the Iranian report was “not true”, adding that the memorandum of understanding that the Iranian broadcaster released was “a complete fabrication”.
“Nobody should believe what Iranian state media is putting out. FACTS MATTER,” the White House said.
Brent crude’s decline encouraged selling in wheat futures, which have a history of price correlation with oil, and attracted further pressure from growing mention of the expanding northern hemisphere harvest, and the spike in supplies that brings.
Harvest has started, for instance, in the southern US Plains, where it is expanding from Texas, where 14% or so is reported as cut, up through Oklahoma and Kansas. In the US Midwest, the Alabama harvest is 15% done, with Arkansas on 5%.
Chicago soft red winter wheat futures for July-26 shed 1.9% in late morning deals, taking to 3.6% their decline in two sessions, before testing support at their 50-day moving average.
The selling is believed by sources to be being encouraged by selling by funds, reverting to their usual net short position in Chicago, after two months of holding a relatively neutral position amid US Plains dryness worries.
For soft red winter wheat itself, as grown in the Midwest, USDA data overnight showed crops holding onto decent condition ratings, of eg 73% good or excellent in Illinois, and 68% in Ohio.
Nonetheless, in a sign that concerns remain over hard red winter wheat (HRW), as grown in the Plains, July-26 HRW futures shed a more modest 0.8%.
The overall US winter wheat rating fell by a further point week on week to 26% good or excellent – matching the lowest figure of the last 30 years, and reflecting declines in hard red winter wheat states such as South Dakota, as well as white winter-growing areas in the north west US.
An upgrade by SovEcon above 90Mt in its forecast for this year’s Russian wheat harvest added to price pressure, which this time spread to Europe.
Paris milling wheat for September-26 dropped 1.6% in late deals, to fall below its 50-day moving average.
London feed wheat futures for November-26 headed for the close down 1.1%, returning below £190/t.
Corn futures suffered from spillover selling in both Chicago, where the July-26 contract shed 0.9%, falling below its 200-day moving average, and in Paris, where the August-26 lot eased 0.1% in late deals.
However, many oilseeds bucked the trend, despite their links to crude oil. Soybeans for July-26 edged up 0.2% in Chicago, while Paris rapeseed futures for August-26 headed for the finish 0.1% higher.
For more detailed oilseed market analysis, see CRM Agri’s Weekly Oilseeds Outlook, as published earlier on Wednesday. CRM Agri on Tuesday published its Weekly Grains Outlook.
