Analysis Grains

Wheat price jumps due to extreme weather

May 7, 2024 - Jurphaas Lugtenburg

Cereals were significantly on the rise during the last trading session. Wheat in the southwest of Russia had already suffered from drought, and now frost threatens to add to the damage. In the US, rain in the cornbelt is causing delays in planting corn and soybeans. Further south in Brazil, everything is disrupted by floods. Crops still in the fields have suffered heavy damage, and the entire supply chain is disrupted. From livestock farmers not receiving feed anymore to slaughterhouses shutting down because no more livestock can be brought in.

The May contract for wheat on the Matif rose by €5.50 to €215.25 per ton yesterday. The September contract closed at €245.25 per ton. On the CBoT, wheat rose by 4.3% to $6.32¼ per bushel. Corn and soybeans also saw an increase. Corn rose by 2.2% to $4.57 per bushel. Soybeans increased slightly more, namely by 2.7%, bringing the closing price to $12.34¾ per bushel.

The weather was the driving force behind the rally in the grain market during the last trading session. It is dry in the southwest of Russia. As if that were not enough, moderate frost is predicted for this part of Russia and the east of Ukraine by the end of this week. According to experts, this could cause significant damage to growing cereal crops.

The price of Black Sea wheat is on the rise. Ikar is quoting $4 higher this week at $216 per ton for Russian wheat delivered to the Black Sea ports. However, Russian wheat exports took a step back last week. SovEcon reports that 770,000 tons of grain were exported last week, compared to 990,000 tons the previous week. Of the grain exported last week, 670,000 tons were wheat.

Corn planting delayed by rain
Rain in the US cornbelt hindered corn planting last week, as indicated in the new Crop Progress report from the USDA. Of the planned acreage, 36% is planted. Last year at this time, 42% was planted, with the five-year average at 39%. Of the corn that has been planted, 12% is emerged, compared to 9% in the five-year average. The pace of soybean planting is also slowing down. A quarter of the soybeans are planted, compared to 30% at this time last year.

The condition of winter wheat has slightly improved this week, with 50% rated good or excellent, compared to 49% last week. By the way, at this time last year, only 29% of the US winter wheat acreage was rated good or excellent. 43% of the winter wheat is heading, compared to 32% in the five-year average. In Arkansas and North Carolina, wheat is the most developed, with 81% heading in both states.

Planting of spring wheat is ahead of schedule. In the six largest spring wheat states, 47% is planted. Last year at this time, it was 21%, with the five-year average at 31%. Also, 47% of the planned acreage of barley is planted. The five-year average for this week is 44%.

Disruptive floods
Players in the soybean market are mainly concerned with the consequences of the floods in the south of Brazil. The state of Rio Grande do Sul is the second-largest soybean producer in the country, and about a quarter of the soybeans still need to be harvested. Before the floods, the soybean harvest in the state was estimated at around 22 million tons. According to local sources, 2 to 3 million tons have been lost. Of the 30% to 40% that still needs to be harvested, an average of 70% to 80% is damaged, especially in the lower-lying areas.

In addition to the damage to crops, transportation is largely at a standstill in the region. This not only affects farmers. Twelve chicken slaughterhouses are partially shut down, and five pork slaughterhouses are not receiving enough or any pigs. Meanwhile, livestock farmers are depleting their feed stocks, as warned by local industry associations.

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.
akkerbouw graanoogst tarweoogst rusland tarwe - agri

Analysis Grains

Drought in Black Sea region affects yield potential

tarweoogst tarwe - agri tarwe

Analysis Grains

Wheat price hits bottom and bounces back

combine gerst brouwgerst gerstoogst zomergerst

Analysis Grains

Grain harvest in Western Europe slowly begins

bewaring akkerbouw opslag graansilo

Analysis Grains

Exporters are quickly emptying the wheat silos