CBOT Weekly: Renewed agreement puts pressure on corn, wheat

WINNIPEG – The renewed agreement between Russia and Ukraine to allow the latter’s grain to be shipped out of the Black Sea has recently been putting pressure on corn and wheat prices at the Chicago Board of Trade (CBOT).

Russia and Ukraine, with mediation from the United Nations and Turkey, agreed on Nov. 17 to an extension of 120 days for the deal which was set to expire in two days.

Ryan Ettner, a commodity broker for Allendale Inc. in McHenry, Ill., said the agreement caused short-term buying for corn and wheat, which cancelled out previous light fund selling. However, despite recent Russian missile attacks, momentum from the agreement on the markets is dampening.

“In the last week and a half, some of these Russian and Ukrainian headlines have really slowed down, especially for wheat. (The renewal) really took a lot of smaller speculative buyers out of the market,” Ettner said.

Unless Russia decides to suspend the agreement, as it had done earlier this month, attacks on Ukraine will not affect grain markets as much as they did earlier in the war, he added.

“The appropriate Russian attack in the appropriate area, now we’re talking about a one-day bounce. Maybe two,” Ettner said. “We had seen before where a Russian attack brought more fear about the Black Sea deal and we’d see four- or five-day bounces.”

Meanwhile, soybean futures have seen volatile trading over the past week as traders focus on the potential for a bumper crop in Brazil due to beneficial weather conditions. While there will be dryness in soybean-growing areas for the next five days, rains are expected for five to 10 days after.

“South American weather is turning out okay. You wouldn’t say that they have an overabundance of rain, but I don’t see too many people saying it’s problematic for some of the rains that they’re missing,” Ettner said.

He added that markets are not yet concerned over a potential rail strike in the U.S. Out of 12 railroad unions, a majority of members in eight of them voted in favour of a new deal. If all don’t agree by Dec. 5, there would be immediate strike action.

However, railway workers haven’t had a work stoppage in the U.S. since 1992 and Ettner believes either a deal will be made in time or the federal government would intervene.

“Yesterday, I saw the first headline which said that one senator was saying that the government would step in again. It looks likes traders aren’t getting as excited this time around as they did last time,” he said. “We’ll probably get on the edge of a possible strike, or (the strike) would begin for a couple of days, then we’ll have government intervention and there wouldn’t be much of an effect at all.”

Ettner added that there will be slower activity on the markets in the days after U.S. Thanksgiving.

“I look forward to a continued grind lower, but the moment funds stop selling, which I do think will be coming soon, the moment you stop seeing open interest drop, then we’ll turn around to a slow grind higher,” he explained.