Soy firm on short-covering ahead of US-China trade talks

CHICAGO: US soybean futures rose on Wednesday on short-covering as investors waited to see if expected talks between Washington and Beijing at a G20 summit this week will defuse a trade dispute that has choked US soybean exports to China.

Corn and wheat followed the firm tone, drawing additional support from a sharply weaker dollar, which tends to make US grains more competitive globally.

As of 1:12 p.m. CDT (1912 GMT), Chicago Board of Trade January soybean futures were up 14-1/2 cents at $8.90 per bushel. Most active CBOT March corn was up 5 cents at $3.73-1/2 a bushel and March soft red winter wheat was up 5 cents at $5.11-1/2 a bushel.

Commodity funds hold a net short position in all three commodities, leaving markets vulnerable to short-covering rallies, with the G20 meeting looming.

US President Donald Trump is due to meet with Chinese counterpart Xi Jinping for the first time since the world's two largest economies imposed punitive tariffs on each other's imports.

Trump is prepared to hike tariffs on Chinese imports if there is no breakthrough, White House economic adviser Larry Kudlow said on Tuesday.

"Speculative short-covering ahead of this weekend's G20 summit, on the risk that a headline or tweet could catch fund managers on the wrong side, pushed January soybeans sharply higher," INTL FCStone chief commodities economist Arlan Suderman wrote in a client note.

China is by far the top global soy importer, and this year's drop in US soy sales to China coincided with a bumper US harvest, threatening to leave stocks piling up despite brisk shipments to non-Chinese destinations.

CBOT corn and wheat rose on technical buying. Strength in wheat accelerated as the US dollar tumbled after a speech by Federal Reserve Chairman Jerome Powell eased worries of a faster pace of interest rate hikes next year.

"This last rally ... is about the weakness in the dollar that was prompted by Mr. Powell's statements," said Tom Fritz, partner with EFG Group in Chicago.

Wheat markets have been weighing prospects for increased US exports as stocks from other suppliers wane, against still-brisk exports from top exporter Russia.

"Wheat prices have bottomed out as we are likely to see higher demand for US wheat next year even though Russia is continuing to dominate the export market," said Phin Ziebell, agribusiness economist, National Australia Bank.

SovEcon, a Russian agricultural consultancy, on Tuesday raised its forecast of Russia's 2018/19 wheat exports to 34.7 million tonnes, from 34.2 million previously.