Analysis Grains
Argentinian wheat harvest looks promising
The global wheat supply is not abundant. To some extent, this provides a floor in the market. However, there is still no clear signal causing the market to rise. Argentina has been experiencing relatively favorable weather conditions this season. The Rosario exchange increased the yield forecast for wheat and noted that corn and soybeans have started well.
The March contract for wheat on Matif closed €1.75 lower at €299 per ton yesterday. On the CBoT, wheat closed 0.9% lower at $5.38¾ per bushel. Corn experienced a sharper decline, closing 1.4% lower at $4.31¾ per bushel. Unlike grains, soybeans closed in the green, albeit marginally. It recorded a slight increase of a quarter cent, bringing the closing price to $9.95¾ per bushel.
Last season was not a good wheat year in Northwest Europe, as reflected in the harvest figures in the United Kingdom. The average wheat yield in the UK stands at 7.3 tons per hectare, according to AHDB's final harvest estimate. This yield is 10% lower than the previous season. Farmers in the UK harvested a total of 11.1 million tons of wheat, which is 20% lower than the previous year. The hectare yield for rapeseed also decreased by 10% to 2.8 tons per hectare. Considering that 25% less rapeseed was sown last growing season, the total harvest of 824,000 tons is 32% lower than the previous year.
Favorable Weather
In Argentina, the growing season is progressing much more favorably. The Rosario exchange raised the wheat yield expectation by 500,000 tons to 19.3 million tons. The cooler weather in the southern hemisphere during the November spring month, along with sufficient rain, has aided wheat growth. Yield estimates for corn and soybeans remain unchanged at 50 to 51 and 53 to 53.5 million tons, respectively. The exchange notes that the growth conditions for soybeans and corn are favorable due to the good weather. The growing season for soybeans and corn has just begun in Argentina. Wheat harvesting has started and typically continues until January.
Deforestation
Deforestation legislation in South America remains a contentious issue. We tend to think of the European law that prohibits the import of products from deforested areas, which has been postponed for a year. However, in Brazil, there is already a moratorium that prohibits traders from buying soybeans from areas where the Amazon rainforest has been cleared. According to the farmers' organization Aprosoja, this regulation does not favor the growers in practice. In a statement, Aprosoja even refers to a purchasing cartel. "The soy moratorium, signed in 2006, was initially presented as a solution to prevent illegal deforestation in the Amazon region. The pact has become an instrument of economic exclusion, discriminating against producers who strictly adhere to Brazilian environmental legislation." Earlier this year, the state of Mato Grosso passed a law that eliminates certain tax benefits for companies complying with the moratorium. Environmental activists accuse the soy trade of attempting to weaken the moratorium, which scientists and environmentalists believe effectively combats deforestation.
