March 3, 2022

US wheat futures volatile due to Russia's invasion

The Russian invasion into Ukraine has resulted in a sharp divide between nearby US wheat futures and deferred contracts on the Chicago Board of Trade (CBOT), as traders look past the near-term supply shock from halted exports, Reuters reported.

Traders are affected by the market volatility as they figure out how long Russia's invasion will prevent grains from being exported from the Black Sea region from world buyers. Both Russia and Ukraine combined account for 19% of global corn exports and 29% of worldwide wheat exports, with prices soaring since Russia's invasion.

The CBOT most-active May wheat increased to its highest in 14 years by an expanded daily 75-cent limit. December and March 2023 wheat unusually dropped by the limit.

CBOT trading volume was estimated at 380,891 contracts, which surpassed the record of 351,063 set on June 26, 2015.

Arlan Suderman, chief commodities economist for broker StoneX, said the drop in deferred contracts showed traders believe that the export disruptions in the Black Sea region is temporary.

Dan Basse, president of consultancy AgResource Co, said commodity funds purchased nearby wheat futures and sold CBOT corn and soybeans to leave inter-market trades in which the funds had taken a short position in wheat, or bet that wheat prices would drop.

May soybeans on the CBOT closed 27 cents lower at US$16.63 per bushel. The most active May corn closed 3/4-cent down at US$7.25 after reaching its highest price since December 2012. Like wheat, deferred corn futures posted sharper losses than nearby contracts.

July wheat and December wheat on the CBOT were priced almost the same at the start of last week. The July contract had a premium of about US$1.50 on March 2.

-      Reuters