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.
By Arunima Kumar
(Reuters) -Oil prices paused their rally on Tuesday, but remained near four-month highs, with the market’s attention focused on the impact of new U.S. sanctions on Russian oil exports to key buyers India and China.
futures slipped 54 cents, or 0.67%, to $80.47 a barrel by 1033 GMT, while U.S. West Texas Intermediate (WTI) crude fell 53 cents, or 0.67% to $78.29 a barrel.
Prices jumped 2% on Monday after the U.S. Treasury Department on Friday imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas as well as 183 vessels that transport oil as part of Russia’s so-called “shadow fleet” of tankers.
“With several nations seeking alternative fuel supplies in order to adapt to the sanctions, there may be more advances in store, even if prices correct a bit lower should tomorrow’s U.S. CPI data come in somewhat hotter-than-expected”, said Charalampos Pissouros, senior investment analyst at brokerage XM.
The U.S. producer price index (PPI) will be released today, followed by the consumer price index (CPI) on Wednesday.
A core inflation rise above the 0.2% forecast could lower the likelihood of further Federal Reserve rate cuts, which typically support economic growth and could boost oil demand. [MKTS/GLOB]
While analysts were still expecting a significant price impact on Russian oil supplies from the fresh sanctions, their effect on the physical market could be less pronounced than what the affected volumes might suggest.
ING analysts estimated the new sanctions had the potential to erase the entire 700,000 barrel-per-day surplus they had forecast for this year, but said the real impact could be lower.
“The actual reduction in flows will likely be less, as Russia and buyers find ways around these sanctions,” they said in a note.
Nevertheless, analysts expect less of an supply overhang in the market as a result.
“We anticipate that the latest round of sanctions are more likely to move the market closer to balance this year, with less pressure on demand growth to achieve this,” said Panmure Liberum analyst Ashley Kelty.
Uncertainty about demand from major buyer China could blunt the impact of the tighter supply. China’s imports fell in 2024 for the first time in two decades outside of the COVID-19 pandemic, official data showed on Monday.
By Arathy Somasekhar
HOUSTON (Reuters) – Peru’s niche Bretaña is gaining popularity in the United States, with the first cargo discharging in the U.S. Gulf Coast this month as U.S. refiners seek alternatives for declining Mexican heavy crude.
Bretaña, a rare heavy sweet crude with minimal metals, is produced in the Peruvian side of the Amazon (NASDAQ:) rainforest. It is then barged along the Amazon river and loaded onto larger ships that depart from Brazil.
The vessel Radiant Pride transported about 300,000 barrels of Bretaña from Manaus, on the banks of the Negro river in Brazil, and discharged on Jan. 2 in Houston, ship tracking data from Kpler and LSEG showed.
The cargo was bought by oil major Shell (LON:), a source said. Shell declined to comment.
“Given the drop in heavy sour crude from Mexico to the U.S. Gulf Coast over the last year, we are starting to see new heavy grades being pulled in to backfill this loss – this is a trend we only expect to continue,” said Matt Smith, an analyst at Kpler.
U.S. imports from Mexico fell to their lowest on record in 2024 as the Latin American country’s oil production fell and a larger portion of output remained at home to be refined.
Two cargoes of Peru’s Bretaña, a relatively new entrant into the market since production began in 2018, discharged at the U.S. West Coast last year – one at Marathon Petroleum (NYSE:) and another at PBF Energy (NYSE:) terminals, the Kpler data showed.
Marathon Petroleum declined to comment. PBF Energy did not immediately reply to a request for comment.
PetroTal Corp, the producer of Block 95 where the Bretaña oilfield is located, bought the assets from Canadian producer Gran Tierra Energy (NYSE:) in 2017, and currently produces about 20,000 barrels of oil per day, according to Chief Executive Officer Manuel Zúñiga.
Challenges with transporting the crude via a pipeline operated by Peru’s state oil firm Petroperu led to a brief halt in exports between 2022 and 2024, Zúñiga said.
Petroperu has struggled in recent years to keep the line operational amid spills and social conflict interrupting its flow.
Three cargoes of Bretaña headed to the U.S. West Coast and one to the U.S. East Coast between 2020 and 2022, Kpler data showed.
About 90% of the Bretaña crude produced by PetroTal is exported, and the remaining is transported by barges to Petroperu’s refinery in Iquitos, Zúñiga said.
PetroTal has a contract with Houston-based Novum Energy under which Novum buys the crude for export and arranges its transportation, Zúñiga added.
Novum did not immediately respond to a request for comment.
While PetroTal hopes to increase production, permitting delays as well as reliance on barges are a current limitation, Zúñiga said.
“You need access to the pipeline,” Zúñiga said, adding that the company is working to secure use of the infrastructure.
Petroperu said last year that it would hold negotiations with producers in the Peruvian jungle so that they can use the pipeline with a fair rate to help cover operational costs.
Investing.com — The future of is unclear due to the anticipated strengthening of the dollar, impending tariffs, and a potential slowdown in the energy transition under the incoming administration of President-elect Donald Trump, according to analysts at BMI, cited by Wall Street Journal.
They point out that even though copper is likely to prosper due to environmental-driven sentiment, the risks associated with their relatively optimistic perspective are leaning towards the negative side.
In a note, the BMI analysts stated, “While we still expect that copper will continue to thrive due to climate-driven sentiment, we note that the balance of risks to our relatively bullish outlook is tilted to the downside.” They do not anticipate a substantial increase in metals demand from the Chinese construction industry.
Nonetheless, they suggest that enhanced industrial activity and growth, driven by government stimulus, could be enough to elevate prices. As of now, the London Metal Exchange (LME) three-month copper is trading 0.6% higher at $9,153 per metric ton.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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