Published on: 16:09PM Jan 24, 2012
Wheat led the grains higher today after rumors of a Russian wheat export tax. March wheat finished 13 ¾ cents higher at $6.33 ½, March corn up 10 ¼ cents at $6.30 ¼, and March soybeans up 2 ½ cents at $12.20.
Russian exports so far are already close to 15 MMTs as the price of wheat has remained relatively cheap compared to other feed grains around the world. The market has obviously been trading a large world wheat carryout for some time now and you can see this in the massive net short position that the “managed money” currently holds in Chicago wheat. With Russia potentially creating an export tax on grain exports over 25 MMTs the market is bidding up the price of front month wheat contracts. Given the winter conditions in Russia/Ukraine, the spread between their prices and the rest of the world has probably bottomed until spring. If wheat prices around the world gain ground from this, this strength could easily transfer back over to US corn as our current supply situation becomes of higher importance/concern and that substitute is no longer an economically viable option.
Stronger wheat helped corn today but it was also stronger interior cash bids. The lack of producer selling has kept the cash markets strong and futures are reflecting the strength as well. Short term I wouldn't be surprised to see the price of front month grains continue to rise between now and the first week of February.
This week we are expecting another big week for soybean exports as South American demand has switched back to US. This could be a temporary adjustment until their export business comes back on line.
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