Analysis Grains

Drought in the US boosts grain market

April 26, 2024 - Jurphaas Lugtenburg

Where wheat on the Matif exchange remains stagnant, the price on the Chicago exchange continues to soar. Yesterday, the psychological barrier of $6 per bushel was broken. This happened more than two months ago. Weather remains the main driving force behind the rally according to analysts. From Ukraine came the news that the Minister of Agriculture is in trouble due to alleged involvement in corruption.

The May contract for wheat on the Matif closed €0.25 higher at €208.75 per ton yesterday. On the CBoT, wheat maintained its upward trend of the past few days and closed 1.3% higher at $6.02¼ per bushel. Corn showed a more modest increase of 0.7% and reached $4.41 per bushel. Soybeans took a step back, closing 0.3% lower at $11.62¾ per bushel.

The Ukrainian Minister of Agriculture, Mykola Solsky, was arrested today on suspicion of corruption. Solsky is accused of being involved in the illegal sale of Ukrainian state land, which took place between 2017 and 2021 and involved an amount of approximately $7 million. The land was from two state-owned companies and was transferred to war veterans on the condition that they lease it to private companies. Solsky denies the allegations against him. Solsky became Minister of Agriculture in March 2022. There is no corruption during his tenure.

Upon the allegations becoming public, Solsky immediately submitted his resignation on Thursday. Officially, he remains minister until the parliament has ruled on that request. Solsky is the first minister from Zelensky's government to be prosecuted for corruption. Zelensky is trying to implement a zero-tolerance policy on corruption and last year replaced his Minister of Defense after corruption allegations. Solsky is one of the driving forces behind keeping export routes open for Ukrainian grain.

Further east in Russia, concerns about drought are increasing. The London Stock Exchange Group warns of drought in the southern wheat-growing region of Russia. Rain is forecasted in Russia, but it will pass north of the Volga region.

In the US, weather remains a topic of discussion in the grain trade. Rain has fallen in the corn belt in recent days. This is not enough to solve the drought problems but sufficient to replenish moisture in the topsoil and help the early-planted corn to grow. More concerning, according to various analysts, is the lack of rainfall in Kansas and Oklahoma. Showers are forecasted for the beginning of next week in the central and western parts of the corn belt and the eastern wheat belt. However, whether grain growers will be happy about that is another question. The US weather service predicts the equivalent of 50 to 75 millimeters of water in a short time and warns of waterlogging and local flooding.

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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