Analysis Grains
Higher war premium on the grain market
The war in Ukraine is once again attracting the attention of the grain trade. Russian attacks on the Ukrainian electricity supply and the possible deployment of long-range missiles by Kiev are reflected in a higher war premium on the wheat market. There are cautiously positive sounds for the wheat harvest of 2025. The Ukrainian Minister of Agriculture expects to harvest more wheat due to a larger area, and the weather is cooperating well for wheat growers in the US this autumn.
The December contract for wheat closed €1.75 higher at €218 per ton yesterday. Wheat on the CBoT showed even stronger gains, closing 2% higher at $5.47¼ per bushel. Corn increased by 1.2% to $4.29¼ per bushel. Soybeans have moved to the January contract, closing 1.1% higher at $10.09¾ per bushel.
The war in Ukraine has now lasted exactly one thousand days. Violence has escalated in recent days. Following Russia's large-scale missile attacks on the Ukrainian energy infrastructure last weekend and the deployment of North Korean mercenaries, the Americans have given the green light for Ukraine to use long-range missiles against Russia. The fear of further escalation of the war is increasing, especially translating into a higher war premium in the price on the wheat market.
Russian grain harvest smaller
Russia harvested 12% less grain by November 1 compared to the previous season. This was reported by the Russian news agency Interfax, based on information from the Russian statistical agency Rosstat. Russian farmers harvested a total of 124.3 million tons of grain, down from 141 million tons last year. 95% of the sown area has been harvested, which is almost the same as last season at the same date. Sunflower harvest stands at 13.9 million tons compared to 14.6 million tons last season. Russian farmers also harvested slightly fewer beets, namely 35.5 million tons compared to 37.5 million tons last season.
Ukraine is expected to harvest 25 million tons of wheat in 2025, up from the preliminary harvest figures of 22 million tons in 2024. This was shared by the Ukrainian Minister of Agriculture Taras Vysotskiy in an interview with Reuters. The larger harvest is due to an expansion of the sown area. Following a record-dry summer and autumn, grain growers in Ukraine planted winter wheat under dry conditions in hopes of rain later in the autumn and a mild winter. Last month, the Ukrainian meteorological service reported that almost all winter wheat in Ukraine was underdeveloped due to the drought. 90% of the sown area is emerging, and the yield ultimately depends on the weather in the winter and spring, according to Vysotskiy. Furthermore, the minister expects that more corn and less soybeans will be sown by Ukrainian farmers next spring. Due to relatively high margins on soybeans compared to corn, Ukrainian growers planted more soybeans last year. Now that the soybean price has dropped significantly and corn remains more stable, Vysotskiy expects 500,000 hectares less soybeans and 500,000 hectares more corn to be planted next season.
Winter wheat condition improves again
The USDA released its second-to-last Crop Progress report of the season yesterday. The corn and soybean harvests are almost complete and are no longer included in the report. The planting of winter wheat is well advanced with 94% of the planned area sown. This is the same as last year, but the five-year average stands at 96%. The condition of winter wheat has improved, with 49% of the area receiving a good or excellent rating, up from 44% last week. The ten-year average for this week is 50% good or excellent. The weather has been fairly favorable for winter wheat growers in the US, as indicated by the Crop Progress report. The crop has benefited from rain. In recent days, more precipitation has fallen in the major wheat-growing regions of the US, and analysts expect the condition of the wheat to further improve.
The sentiment in the soybean market is bearish according to analysts. The market saw a rebound yesterday due to a few large orders, including 135,000 tons of soybean meal to the Philippines, 30,000 tons of soybean oil to India, and 261,000 tons of soybeans to Mexico. However, the volume in these orders is too small to truly change the direction of the soybean market.
