3 Big Things Today, January 19, 2021

Wheat Futures Surge Overnight; Russian Export Tax Keeps Trade Interested.

1. Wheat Futures Surge on Increased Russian Export Tax

Wheat futures jumped in overnight trading to near a six-year high as Russia will implement an export tax on the grain.

A tax of 25 euros ($$30.33) per metric ton on shipments from Russia, the world’s largest exporter of the grain, is set to go into effect from Feb. 15 through the end of the month.

The government said Friday it wanted to raise the tax to 50 euros a metric ton from the beginning of March through the end of June. It’s so far undetermined how much the tax will be starting July 1.

Any export tariff likely will drive buyers to the U.S., expected to be the world’s second-largest wheat exporter, and push up the cost of the grain.

Wheat futures also rose as moisture deficits are expected to expand in parts of the southern Plains where hard-red winter wheat is overwintering.

Parts of western Kansas are facing an extreme drought, the U.S. Drought Monitor’s second-worse classification. About half of Kansas, the biggest producer of wheat, is suffering from some sort of drought, the monitor said.

Soybean futures, meanwhile, plunged in overnight trading after the National Oilseed Processors Association reported December crush that fell short of forecasts.

Crushers processed about 183.2 billion bushels of beans in December, the second-highest level on record but just short of expectations for 185.7 billion bushels.

Also weighing on soybean prices is rain in parts of South America. Scattered showers were expected over the weekend in parts of Argentina, according to forecaster Commodity Weather Group.

Wheat futures for March delivery jumped 14¢ to $6.89½ a bushel overnight on the Chicago Board of Trade, while Kansas City futures gained 12¢ to $6.55 a bushel.

Soybean futures dropped 8¾¢ to $14.08 a bushel overnight. Soymeal was down $4.20 to $459 a short ton and soy oil lost 0.57¢ to 41.28¢ a pound.

Corn for March delivery rose 1¾¢ to $5.33¼ a bushel.

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2. Russian Growing Woes and Export Taxes Have All Eyes on Wheat

A rough start to the growing season in Russia along with the country’s graduating export tax that’s scheduled to start on Feb. 15 is keeping market-watchers interested in the global wheat scene.  

Russian wheat got off to a “difficult start and (is) therefore in quite sensitive condition,” according to a report from Commerzbank sent Monday.

The government’s announcement last month that it would implement a 25-euro-per-metric-ton export tax on the grain from Feb. 15 through the end of the month gave prices a bump.

Friday’s announcement that the tax would be doubled from March 1 through the end of June only bolstered the bulls, Commerzbank analyst Michaela Helbing-Kuhl said in her report.

“Since the tax was first announced in December, wheat prices on the world market and in Russia have risen steeply,” she said. “In other words, if the Russian government is targeting a specific domestic level for the wheat price, it can only reduce the export incentive brought about by the higher prices by raising the export tax. And apparently this is what it is planning to do.”

Anything that may drive up the cost of wheat will hurt countries such as Egypt and Algeria, where the grain is a staple in food-making.

Algeria issued a new tender for wheat, while Turkey postponed a planned purchase, showing the different reactions countries are having to the news, Helbing-Kuhl said.

“There is also a lack of agreement among analysts, with no small number suspecting that Russian exporters will now try to sell off as much wheat as possible before the tax comes into effect – especially as waiting until 2021-22 no longer really appears to be a viable alternative. So far, it is the price of the old crop that is soaring, while prices in the post-harvest contract due in September have picked up by significantly less (as yet).”

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3. Winter Weather Advisory in Effect in Parts of Iowa and Illinois

A winter weather advisory remains in effect for counties in eastern Iowa and northern Illinois this morning as freezing drizzle falls and ice accumulates, according to the National Weather Service.

Travel is expected to be dangerous as “very slippery” roads and bridges are possible in the area, the NWS said in a report early this morning.

Light snow is expected in parts of central Iowa this morning along with some freezing drizzle, the agency said.

“Another round of light snow, along with brisk winds and minor blowing snow, is expected across the northeast … Iowa later today as well,” the NWS said.

Farther north and west, strong winds are expected in southern South Dakota this morning. Winds are expected to be sustained from 20 to 30 mph with gusts of up to 50 mph in the forecast, the agency said.

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