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Analysis Crops

Wheat trade shows little confidence in new harvest

April 25, 2024 - Jurphaas Lugtenburg

The European trade sends mixed signals. The latest contract for the old harvest on the Matif is faltering while the first contract for the new harvest is making upward strides. In the US, wheat continues to rise. There are some doubts about corn, partly due to disappointing demand for ethanol.

The May contract for wheat on the Matif closed €1 lower at €208.50 per ton yesterday. On the CBoT, wheat continued to rise and closed 1.6% higher at $5.94½ per bushel. Corn fell in the last trading session on the Chicago exchange by 1.2% to $4.37¾ per bushel. Soybeans mostly moved sideways and ultimately closed 0.1% lower at $11.66 per bushel.

Traders in wheat on the Matif are sending conflicting signals. The May contract - the last contract for the 2023 harvest - is under pressure. A plentiful supply of wheat in the European market, partly due to disappointing exports and relatively large imports from Ukraine, is cited by various analysts as the cause.

Traders are much less certain about why the wheat balance remains so ample. The first contract for the new harvest made significant upward strides over the past week and closed at €228.50 per ton yesterday. The spread between the May and September contracts is relatively large at €20. Especially considering that the May contract will expire in a few weeks.

The news that US President Biden has shepherded the aid package for Ukraine through parliament is also causing some unrest in the grain market. Some analysts suspected that the Ukrainian army was on its last legs. Kiev may therefore be forced to sit down at the table with the Kremlin for peace negotiations. Money and military equipment from the US are a boost for Ukraine, but also increase the likelihood that the war will drag on. The difficulties for Ukrainian farmers with grain exports, low prices, and labor shortages continue as a result.

Declining ethanol production
Corn in the US is taking a hit from disappointing export figures. The US has exported 22 million tons of corn so far this season compared to the 24.5 million tons predicted by the USDA. New ethanol production figures have also emerged. Last week, 954,000 barrels of ethanol were produced. This was down from 983,000 barrels per day the previous week, and 1.3% less ethanol was produced compared to the same week last year. The demand for gasoline is also lagging, with 11.4% less demand compared to the same week last year. Some analysts see this as a sign that less corn may be needed for ethanol production, which is blended as a biofuel in gasoline.

Jurphaas Lugtenburg

Jurphaas Lugtenburg is a market specialist in onions, carrots, and commodities such as wheat, corn, and soybeans at DCA Market Intelligence. He combines his degree in business administration with a passion for farming.
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