Wheat exploded to a 16-month month high on Friday, with prices for the Chicago wheat contract topping $5.60 per bushel.
The market is being bolstered by potential Chinese demand. Following the trade deal, market watchers are expecting China to announce a new plan to import more wheat. Much of their purchases could come from the United States, and increased Chinese buying could account for over 15% of U.S. wheat exports in the coming years.
Adding fuel to the fire, foreign growers are seeing problems with their wheat crops. The grain is grown around the world, and competition from foreign farmers had kept prices depressed in recent years following big harvests from Argentina, Ukraine, Russia, and Australia. Now, each of these major competitors is fearing a drop in production, especially Australia, where drought conditions could cut the crop size by more than 5%.
As Chicago wheat rallies, other commodities are following along, with March corn, soybeans, and Kansas City wheat all reaching multi-month highs on Friday, trading for $3.90, $9.50, and $4.80 per bushel, respectively.