Analysis Grains

Weather forecasts dampens the wheat market

May 2, 2024 - Jurphaas Lugtenburg

The wheat market is very sensitive to weather reports. Reports of drought in important cultivation areas boosted the wheat market last week. This week, rain or showers are in the forecast, which could easily lead to a downward correction. You would almost think that only farmers are active in the wheat trade. Corn and the US received a small boost from Biden's plans to include ethanol in sustainable aviation fuels.

The May contract for wheat on the Matif closed €3.25 lower at €205 per ton yesterday. On the CBoT, wheat lost 0.6% and ended at $5.81½ per ton. Corn and soybeans were on the rise in the last trading session. Corn rose by 0.9% to $4.43¼ per bushel. Soybeans also increased by 0.9%, bringing the closing price to $11.55¾ per bushel.

Players in the wheat market are very sensitive to weather reports. Showers are predicted for the south of Russia later this week. Showers almost by definition have a local character, and it is also predicted that not everywhere in the south of Russia will receive precipitation. Farmers in the eastern part of the American wheat belt were more fortunate. There was widespread rain there yesterday. The eastern parts of Kansas and Oklahoma and the northern part of Texas were missed by the rain front. Nevertheless, it was enough to dampen the sentiment in the wheat market.

Good and bad sides
In the cornbelt, the rain of the past day is both a curse and a blessing. It was dry, so in that sense, the rain is more than welcome. On the other hand, the planting of corn and soybeans will come to a halt for a few days. The soil needs to settle first before the planting machines can return to the fields.

An uplift for the American corn sector is the long-awaited decision by the Biden administration on green aviation fuel. The US Department of the Treasury released the new tax and subsidy plans on this matter. The industry has been lobbying for months to include corn ethanol in the scheme. This effort has paid off, as corn is expected to be eligible for the program in the plans. According to the Treasury Department's guidelines, aviation fuel is considered sustainable if it emits 50% less greenhouse gas over the entire life cycle compared to traditional petroleum-based fuels.

Wheat market in Ukraine picking up
In April, Ukraine exported 1.9 million tons of wheat. According to some sources, the export price reached the highest level in eleven months. More importantly, the Ukrainian wheat stock is decreasing significantly. Some analysts suggest that wheat exports could slow down in the coming months until the new harvest becomes available.

Yesterday, the USDA released a forecast for the upcoming wheat harvest in Australia. With 25.8 million tons, the 2024/25 harvest would be comparable to the previous season. This production is 3% below the ten-year average. The USDA expects Australian wheat exports to decrease by 2.5 million tons to 17.5 million tons in the upcoming season. This decline, according to the USDA, is because the current season is depleting the stocks.

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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