By Kirk Maltais


-- Wheat for March delivery fell 1.6% to $5.95 3/4 a bushel on the Chicago Board of Trade on Wednesday, with prices in Russia seen as continuing to drop despite signs of pent-up demand for wheat exports.

-- Corn for March delivery rose 0.1% to $4.48 a bushel.

-- Soybeans for March delivery rose 0.3% to $12.22 1/4 a bushel.


HIGHLIGHTS


Trending Lower: Wheat reversed course on its higher finish from Tuesday, with Russian prices dropping despite the show of strength in the U.S., said Charlie Sernatinger of Marex in a note. He adds that Tuesday's uptick was a bout of short covering, with other traders optimistic for new export demand for exports.

However, technical action failed to reinforce that optimism, causing traders to add new short positions instead.


Hedging Bets: Caution amid world geopolitical issues and ahead of the Federal Reserve's rate decision Wednesday afternoon kept a lid on grain futures for most of the day. While the Fed's guidance on potential rate cuts was welcome, a breakout in short covering expected by traders has yet to materialize.

"The markets are hungry for news to move the needle, but nothing of substance has appeared just yet," said Virginia McGathey of McGathey Commodities.


Warning Signs: Data showing a contraction of Chinese manufacturing for a fourth consecutive month was a source of pressure for grains in morning trading. Traders thought a weaker economy will lead to lesser demand for commodity exports, including U.S. grains.

"The gloomy manufacturing news weighed on commodity price valuations," said AgResource in a note.


INSIGHT


Looking for the Bottom: Bountiful supply in South America along with general weak demand looks to have been mostly priced into CBOT grains, said Craig Turner of StoneX in a note, predicting a surge in short covering in the near future.

"My gut tells me we are putting in a short-term low at the very least," said Turner. "This could turn into a seasonal bottom if demand picks up at these lower prices."

Fund traders are holding large short positions, particularly for corn, which is net short by over 265,000 contracts, according to Friday's Commitments of Traders Report from the CFTC.


Ethanol Rebalances: The latest weekly report from the EIA showed a turnaround in average daily production for U.S. ethanol, while inventories retreated from the 25 million-barrel mark. Average daily production for the week ended Jan. 26 landed at 991,000 barrels a day, up from 818,000 barrels a day the previous week. This brings production close to its normal levels seen in the past year, up from last week's pandemic-era lows.

Meanwhile, inventories totaled 24.27 million barrels, which is well below last week's total of 25.82 million barrels.


AHEAD


-- The USDA is scheduled to release its weekly export sales report at 8:30 a.m. EST Thursday.

-- The USDA is due to release its monthly grains crushing report at 3 p.m. EST Thursday.

-- The CFTC is scheduled to release its weekly Commitments of Traders Report at 3:30 p.m. EST Friday.


Write to Kirk Maltais at kirk.maltais@wsj.com


(END) Dow Jones Newswires

01-31-24 1538ET