Analysis Grains
Drought in American winter wheat rapidly decreasing
Some decreasing tensions in the Black Sea region, rain on the southern prairies and snow in the weather forecast in the US are causing some price pressure on the wheat market. Trump's plans for a tariff on products from Canada and Mexico are still lingering. As a result, potash becomes a lot more expensive for users in the US. In Brazil, farmers have discovered a new crop alongside soybeans.
The December contract for wheat on the Matif closed €2 lower at €214.25 per ton yesterday. Wheat also took a step back on the CBoT and closed 0.3% lower at $5.37¾ per bushel. Corn lost 1% to end at $4.15¾ per bushel. Unlike grains, soybeans were on the rise and closed 0.5% higher at $9.88¾ per bushel.
Today, Americans are celebrating Thanksgiving. Therefore, the drought monitor is one day earlier than usual. Problems with drought in winter wheat are not completely resolved yet, but the worst is over. 28% of winter wheat in the US is in a drought region. That was 40% last week, and four weeks ago, 62% was affected by drought.
Yesterday, Algeria and Tunisia secured wheat in tenders. Algeria bought 150,000 tons of bread wheat for $267 per ton C&F (franco). Tunisia secured 100 tons of soft wheat and 100 tons of durum wheat for $259 and $348 per ton C&F, respectively. Allegedly, all wheat in the tenders comes from the Black Sea region.
Nervousness due to the war between Russia and Ukraine is easing on the grain market. The fighting continues unabated, but the grain exports of both countries do not seem to be greatly affected. Rain is forecasted for southern Russia, contributing to the price pressure on the wheat market. According to weather models, the rain will pass over the growers in the southernmost part of Russia.
Cotton gaining popularity in Brazil
Brazil is a major player in the global soybean market. However, Reuters notes that the largest growth in soybean acreage seems to have peaked. The demand for soybeans from China has more or less stabilized and appears to have reached its peak. China accounts for about 70% of Brazilian soybeans and was a key driver for the expansion of soybean acreage in Brazil. Cotton could potentially become the new cash cow for Brazilian farmers. "Given the expected profit margins, cotton will yield better returns than soybeans, and much more than second-crop corn," Reuters quotes the Brazilian market bureau Veeries.
Trump's plans for an import tariff on products from Canada and Mexico would make potash much more expensive. About 90% of the potash used in the US comes from Canada, and with a 25% tariff, potash would become €69 more expensive per ton. There are no alternative suppliers. The US imports 10% of the potash from Russia. Belarus, the other major player in the potash market alongside Canada, is prohibited from supplying fertilizers to the US due to sanctions.
