After last week's rally, the wheat trade started the new week with a correction. The drought in the Russian wheat regions has caused less damage than previously thought. The Kremlin also made news in a different way. According to a letter obtained by Bloomberg, it appears that Moscow is trying to artificially inflate the wheat price. In the US, farmers are making good progress with planting corn. More than a quarter of the planned acreage is already in the ground.
The May contract for wheat on the Matif closed €3.50 lower at €208.25 per ton yesterday. Wheat on the CBoT closed 2.2% lower at $5.90¼ per bushel. Corn and soybeans traded more sideways on the Chicago exchange. Corn lost 0.2% to $4.39¼ per bushel. Soybeans closed in the green with a slight increase of 0.1% to $11.60¾ per bushel.
The rally in wheat on the Paris exchange was partly due to drought in Russia. The market's reaction may have been somewhat strong according to some analysts. According to the Russian state weather service, the consequences of the drought are not as severe. In the southern European part of Russia, conditions for planting grain and the development of crops in the ground are average. The weather service warns of potential damage from drought in the Asian part, but according to the Russian Meteorological Institute, it has not reached that point yet.
Last week, SovEcon reported that Russian farmers had planted 3.3 million hectares of grain by April 19. Last year at this time, 3.8 million hectares of grain had been planted. Of the grain area, 0.6 million hectares have been planted compared to 1 million hectares last season.
Market Manipulation
One of the major Russian grain exporters, TR Rif, accuses the Kremlin of trying to inflate the grain price. This is based on a letter from TD Rif obtained by Bloomberg. "As market participants, we have become hostages of these manipulations that have a major impact and harm our position in the market and reputation," Bloomberg quotes from the letter. The Kremlin is weakening the export position of Russian companies, as indicated in the letter. A spokesperson for TD Rif denies any involvement with the letter, according to Bloomberg.
TD Rif made headlines earlier when two ships were detained by Russian authorities due to food safety issues with the loaded grain. This reason was deemed dubious, and Egypt, the destination for the grain, intervened to get the ships out of the port. The letter reveals that exporters who do not comply with the prices set by Moscow face 'unfair sanctions' such as refusal of phytosanitary documents.
Progress is Everything
Yesterday, the USDA released the weekly Crop Progress report. There are no major changes in wheat. Drought in Kansas remains a concern. 49% of the winter wheat acreage is rated good or excellent, down from 50% last week. 34% of the planned spring wheat acreage has been planted. The five-year average for this week is 19%, while only 10% was planted last season.
American farmers are making good progress with corn planting. In the eighteen largest corn states, 27% of the planned acreage has been planted. Last week it was 12%, and the five-year average is 22%. Of the planted corn, 7% is above ground. Soybean planting is also ahead. 18% of the planned acreage has been planted through April 28, compared to 10% in the five-year average.