Commodities
Cooling prices chill drive to add wheat acres in US Corn Belt
By Julie Ingwersen
CHICAGO (Reuters) – A Biden administration drive to increase U.S. wheat plantings after the Ukraine war is faltering as wheat prices hover around four-year lows and exportable supplies continue to flow from the Black Sea region, curbing demand for American grain.
Wheat acreage expanded last year as prices soared to a near record high after Russia’s 2022 invasion of Ukraine. But U.S. plantings dropped nearly 5% this year, resuming a decades-long trend that has coincided with a more recent slide in the U.S. share of the global wheat export market.
Farmers planting less wheat in the world’s No. 4 wheat exporter could be a concern for global markets as the U.S. Department of Agriculture (USDA) forecasts world wheat supplies will tighten to a nine-year low, and increasingly extreme weather creates more uncertainty for global production of the staple grain.
In 2022, U.S. President Joe Biden visited Illinois and praised farmers for trying to avert a wheat supply shortage triggered by war in Ukraine, a major grain producer. His administration also saw increasing wheat planting as a way to help lower food inflation.
To encourage plantings in the central United States, the administration turned to crop insurance – not for wheat, but for crops such as soybeans that could be planted immediately after wheat and harvested in the same year. In parts of the U.S. Farm Belt, it is the income from a second crop, grown later in the season, that makes winter wheat economically viable.
Insurance coverage on a second crop had been limited to farmers in the southern Midwest, but the USDA took steps to make policies more widely available.
While the expansion in crop insurance initially helped to make wheat more attractive, the initiative was overshadowed by a plunge in wheat prices between September 2022, when winter wheat planting decisions were finalized for 2023, and the following year, when farmers planted the 2024 wheat crop.
Benchmark CBOT wheat was trading at around $9 a bushel in late September 2022, and around $5.40 a year later. Futures closed on Tuesday at $5.30-3/4. [GRA/]
Jeff O’Connor, who hosted Biden in 2022 on his farm near Kankakee, Illinois, said crop insurance for double cropping reduces risks for farmers who want to add wheat to their rotations. But the measures had little impact on his planting decisions.
“My wheat acres are determined by rotation and occasionally market conditions,” O’Connor said. “Crop insurance availability for double crop doesn’t play into the decision, with the way that the rules for coverage works,” O’Connor said.
Double cropping can be highly profitable, but also risky, especially in the northern half of the country where autumn frosts might kill the second crop before it is ready for harvest. Crop insurance mitigates the risk.
Planting two crops a year is common in the milder climate of the southern Midwest, including the southern third of Illinois. The Biden administration’s goal was to expand the practice northward, into the heart of prime Midwest corn and soy farmland.
Farmer response has been muted, however.
“We’ve found American farmers in the central Corn Belt to be very, very reluctant to alter crop rotation patterns unless there is a massive profitability signal,” said Matt Herrington, director of commodity research for World Perspectives Inc, a research and analytical firm.
DOUBLE CROPPING
In April 2022, USDA estimated that double cropping, as well as a two-year increase in loan rates for food crops, would help U.S. farmers make up for up to 50% of the wheat typically exported by Ukrainian farmers and lower costs to consumers.
In fact, Ukraine’s wheat exports increased to 18.1 million metric tons in the 2023/24 marketing year, matching the country’s pre-war five-year average, USDA data showed. U.S. exports dwindled to 19.2 million tons, a 52-year low as Plains drought drove up U.S. wheat prices to uncompetitive levels.
In the current marketing year, the USDA forecasts a decline in Ukraine’s wheat exports to 13 million tons as the war drags on, while U.S. wheat exports are expected to recover slightly to 22.5 million tons as better yields help offset the smaller planted acreage.
A USDA spokesman said farmers had responded strongly to expanding double-crop insurance in more than 1,500 counties, with a significant increase in winter wheat acres in 2023.
For the 2024 harvest, the USDA estimated a 4.7% reduction in total U.S. wheat plantings to 47.24 million acres (19.12 million hectares), due to a 7.9% drop in winter wheat acres led by declines in top producing state Kansas, as well as Illinois.
Double-cropping can boost soil health by keeping the ground covered for more months of the year. The practice could become more feasible farther north as the climate warms, and as seed technology improves.
Eric Miller, a central Illinois farmer, signed up for the expanded insurance for double-cropping. However, he did not change his wheat or double-crop soybean acres as a result, and instead stuck to his regular crop rotation this year.
“Obviously price and fall weather matters. (If) price per bushel is up, (wheat) acres will probably be up,” Miller said.
Investing.com– Gold prices hit a record high in Asian trade on Monday amid growing bets that the Federal Reserve will cut interest rates by a bigger margin later this week.
Reports of a second assassination attempt on Republican presidential nominee Donald Trump also spurred some demand for safe havens, although Trump appeared to be unharmed, and the assailant apprehended.
Asian trading volumes were somewhat limited by market holidays in Japan, China, and South Korea.
rose 0.4% to a record high of $2,589.02 an ounce, while expiring in December rose 0.1% to $2,613.70 an ounce.
Gold benefits from rate cut bets as Fed looms
A softer allowed for more strength in gold prices, as markets awaited a Fed meeting.
The central bank is widely expected to on Wednesday, although markets are split between a 25 or 50 basis point cut.
showed markets split exactly 50% over the two options, with bets on a bigger cut coming back into play on concerns over weakness in the labor market.
The central bank is also expected to kick off an easing cycle from this week, with analysts expecting at least 100 bps of rate cuts by the end of the year.
Lower rates bode well for precious metals, given that they reduce the opportunity cost of investing in non-yielding assets.
rose 0.4% to $1,004.80 an ounce, while rose 0.8% to $31.332 an ounce.
Trump assassination attempt spurs some safe haven demand
Gold saw some safe haven demand after reports of a second assassination attempt on Trump, this time at his golf course in Florida.
But secret service agents foiled the attempt in a reported shootout with the assailant, who was later apprehended by authorities. Trump was unharmed during the event, stating as much in a message on his fundraising website.
Copper prices steady after weak Chinese data
Among industrial metals, copper prices benefited from a softer dollar. But gains in the red metal were held back by a string of weak economic readings from China, the world’s biggest copper importer.
Benchmark on the London Metal Exchange rose 0.1% to $9,276.0 a ton, while one-month rose 0.1% to $4.2225 a pound.
A string of data released from China over the weekend showed and grew less than expected in August, while rose and fell.
The readings ramped up concerns over an economic slowdown in the country, which could bode poorly for its appetite for copper. But ANZ analysts said that the government could now have more impetus to release stimulus measures.
By Robert Harvey
LONDON (Reuters) -Oil prices edged higher on Monday as ongoing disruption to U.S. Gulf oil infrastructure balanced persistent demand concerns after a fresh round of Chinese data while investors await a likely cut to U.S. interest rates this week.
futures for November were up 46 cents, or 0.64%, at $72.07 a barrel by 1207 GMT. futures for October rose 52 cents, or 0.76%, to $69.17.
The market is likely to remain cautious until the Federal Reserve makes its interest rate decision on Wednesday, said Phillip Nova analyst Priyanka Sachdeva, adding that prices are still supported by some supply worries given that some capacity remains offline in the Gulf of Mexico.
Traders are increasingly betting on rate cut of 50 basis points (bps) rather than 25 bps, as shown by the CME FedWatch tool that tracks fed fund futures.
Lower interest rates typically reduce the cost of borrowing, which can boost economic activity and lift demand for oil.
However, a cut of 50 bps could also signal weakness in the U.S. economy, which could raise concerns over oil demand, said OANDA analyst Kelvin Wong.
Saxo Bank analyst Ole Hansen, meanwhile, said activity is likely to remain light ahead of the Fed meeting, adding that the outcome “looks like a coin toss between 25 and 50 bps”.
Nearly a fifth of crude oil production and 28% of output in the Gulf of Mexico remains offline in the aftermath of Hurricane Francine.
Weaker Chinese economic data released over the weekend dampened market sentiment, with the low-for-longer growth outlook in the world’s second-largest economy reinforcing doubts over oil demand, IG market strategist Yeap Jun Rong said in an email.
Industrial output growth in China, the world’s top oil importer, slowed to a five-month low in August while retail sales and new home prices weakened further.
Oil refinery output also fell for a fifth month as weak fuel demand and export margins curbed production.
Brent and WTI each gained about 1% last week but remain comfortably below their August averages of $78.88 and $75.43 a barrel respectively after a price slide around the start of this month driven in part by demand concerns.
Investing.com — Oil prices rose Monday, benefiting from ongoing disruption to U.S. Gulf oil production as well as a softer dollar ahead of an expected interest rate cut by the Federal Reserve later this week.
At 08:05 ET (12:05 GMT), rose 0.7% to $72.11 a barrel, while rose 0.8% to $68.30 a barrel.
Rate cuts in focus as Fed meeting looms
A softer was the biggest point of support for oil prices, as markets positioned for an from the Fed on Wednesday.
The central bank is likely to kick off an easing cycle, although traders are split over a 25 or 50 basis point cut.
Still, lower rates bode well for economic growth, which in turn could help keep U.S. fuel demand supported in the coming months.
Continued disruption in Gulf of Mexico
Also helping the tone was the continued disruption of production in the Gulf of Mexico following the arrival of Hurricane Francine.
Nearly a fifth of crude oil production and 28% of natural gas output in U.S. Gulf of Mexico federal waters remains offline, the U.S. offshore energy regulator said on Sunday.
Francine hit Louisiana as a Category 2 hurricane on Wednesday, eventually cutting power in four southern states.
Chinese economic data underwhelms
But gains were capped by persistent concerns over slowing demand, especially following a slew of weaker-than-expected economic data from China over the weekend.
and both missed expectations, while rose and fell.
The readings ramped up concerns that slowing economic growth in the world’s biggest oil importer will dent its appetite for crude.
Analysts at ANZ said Beijing was likely to roll out more stimulus measures to help support local economic growth, although they still expect gross domestic product to come below the government’s 5% target in the third quarter.
Concerns over China saw both the Organization of Petroleum Exporting Countries and the International Energy Agency slash their outlook for oil demand growth in the current year.
Holidays in China and Japan also kept trading volumes relatively slim.
(Ambar Warrick contribute to this article.)
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