Grains & Raw Materials

Russia in turmoil over frost damage in grains

May 10, 2024 - Jurphaas Lugtenburg

Frost late in the season in the south of Russia is 'catastrophic for the crops' there. You can't deny the local leaders some sense of drama. There is little discussion about frost damage, but according to some analysts, it is being exaggerated. Egypt made its move in the wheat market and secured more than the market expected.

The May contract for wheat on the Matif rose yesterday by €6.50 to €215.25 per ton. The September contract reached €244.75 per ton. Wheat also rose on the CBoT by 0.6% to $6.19¾ per bushel. Corn took a step back on the Chicago exchange and closed 0.6% lower at $4.42¾ per bushel. Soybeans saw an even stronger decline, with prices dropping by 1.6% to $11.92¾ per bushel.

Frost has wreaked havoc in three southern provinces of Russia. In Lipetsk, Voronezh, and Tambov, frost has caused serious damage resulting in lower yields. The provinces have declared a state of emergency for agriculture in the area. 'The frost in May has catastrophic consequences, and the upcoming harvest will be significantly smaller,' writes Igor Artamonov, governor of Lipetsk on Telegram. His counterpart from Tambov writes that crops in his province have frozen, and winter grains have suffered severe damage. According to the Ministry of Agriculture of Voronezh, initial data from the province shows that 265,000 hectares have been frozen or severely damaged. The Russian news agency Tass reports that some fields need to be replanted.

There is no doubt that there is frost damage in Russia. Some analysts believe that Russia is taking advantage of the situation and exaggerating the damage to further stimulate grain prices. In this, the Kremlin has been quite successful judging by the market's reaction.

In addition to the news from Russia, Egypt also provided support to the wheat market. State buyer Gasc secured more wheat in a tender than the market expected. In total, Egypt bought 420,000 tons of wheat in the latest tender. Of this, 360,000 tons are from Russia and 60,000 tons from Romania. All Russian bids were at $255 per ton FOB (Free on Board) with a deferred payment term of 270 days. The Romanian batch whose offer was accepted was at $259.50 per ton FOB.

Drought in the US easing
In the US, concerns about drought in the corn belt are easing. The recent rain came at a less opportune time for planting corn and soybeans. On the other hand, growers are relieved that the soil moisture has been replenished. Weather conditions were less favorable in the western wheat belt. Farmers in western Kansas and Oklahoma caught a bit of rain at the end of the season.

This evening Dutch time, the USDA will release the May edition of the Wasde Report. For corn and soybeans, the trade expects lower global ending stocks for the 2023/24 season, as indicated by the Wall Street Journal survey. No major changes are expected for wheat ending stocks. The May edition is the first Wasde report with expected inventory figures for the 2024/25 season. The trade is anticipating a somewhat bearish outlook for corn and soybeans and a bullish outlook for wheat.

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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