A wheat-related ETF reflected one of the few areas of strength in the markets on Tuesday as wheat futures gained on speculation of large scale U.S. grain purchases with China looking to reopen trade and Russia considering a reduction in wheat exports to stabilize its domestic market.
The Teucrium Wheat Fund (NYSEArca: WEAT) increased 1.0% Tuesday while CBOT wheat futures were flat at $5.175 per bushel.
Supporting early morning gains, traders were optimistic that the U.S.-China trade negotiations were progressing.
“The commodity markets are starting to gear up for the idea that China’s going to open up,” Mike Zuzolo, president of Global Commodity Analytics, told Reuters. “The trade is really gearing up for the idea that these rumors are going to materialize.”
China offered a $1 trillion deal to increase imports from the U.S. in an effort to advance trade negotiations with Washington. The announcement came a day after U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs on Chinese imports and offered a tariff rollback during trade discussions.
Global wheat futures
Further bolstering global wheat futures, expectations of diminished supply out of Russia could push more global buyers into U.S. markets.
“The potential tightening of Russian export checks and the continuing price rise in Russia are supporting the renewed competitiveness of European wheat and hopes it will capture some more demand,” one futures dealer told Reuters.
The Russian government could restrict exports in an attempt to bolster domestic supplies and clamp down on rising wheat prices in its own markets, according to new agencies inn Russia.
Meanwhile, wheat traders were closely watching winter storms across the central U.S. and forecasts for a harsh cold system plowing through. Heavy snowfall could help insulate dormant winter wheat from the cold, but missed snowfall could leave some areas vulnerable to crop damage.
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