Analysis Grains

Wheat prices keeps rising

May 14, 2024 - Jurphaas Lugtenburg

It remains restless in the wheat market. Late frost in the season in Russia already caused a stir in the market and yesterday new yield forecasts were added to that. Furthermore, the USDA released the new Crop Progress report. It was fairly neutral for wheat. In the US, some analysts are more concerned about corn.

The September contract for wheat on the Matif closed €9.25 higher at €258.75 per ton yesterday. Wheat also saw a significant increase on the CBoT. The July contract on the Chicago exchange closed 3.5% higher at $6.87 per bushel. Corn also moved up slightly, gaining 0.6% to $4.72½ per bushel. Soybeans moved more sideways and closed half a cent higher at $12.19½ per bushel.

Late frost relatively late in the season already caused quite some unrest in the wheat market last week. Yesterday, the new yield forecast from Ikar was added to that. Ikar expects that this coming harvest, 86 million tons of wheat will be harvested in Russia, down from 91 million tons in the previous forecast. For comparison: in the Wasde report last Friday, the USDA projected a wheat harvest of 91.5 million tons. Ikar reduced the wheat export forecast by 3.5 million tons to 47 million tons. The USDA, on the other hand, increased the export expectation by 1.5 million to 51.5 million tons last week. The price for Russian wheat from Ikar this week is $221 per ton. That is $5 higher than last week.

SovEcon also lowered the yield forecast for wheat in Russia by 3.4 million tons to 89.6 million tons. In the south of Russia, only 20% to 40% of the average rainfall has fallen in recent months. This region accounts for approximately 40% of all Russian wheat production. "The problems are exacerbated by unexpected late-night frost that further pressures yields in the central and southern regions," writes SovEcon. "The crop was particularly susceptible to frost damage due to being weakened by drought. The extent of the damage still needs to be determined, but further reduction in yield expectations is certainly not ruled out."

Smallest wheat stock since 2008
Other bullish news for wheat came from India. The Indian wheat stock has dropped to the lowest level in sixteen years as of May 1. On May 1, there were 26 million tons of wheat in government storage in India. That was 29 million tons last year and the smallest wheat stock since 2008 according to the government agency Food Corporation. Wheat yields in India have been disappointing in the past two years. In addition, the Indian government has released a record amount of wheat from the intervention stock onto the market. This was done to ensure an adequate supply in the domestic market and to control prices.

The USDA's weekly Crop Progress report from yesterday evening Dutch time was fairly neutral regarding wheat. 50% of the winter wheat acreage is rated good or excellent. This is the same as last week. Winter wheat is fairly advanced in growth. Namely, 57% is in the heading stage compared to 44% in the five-year average. Significant progress is being made in planting spring wheat in the US. 61% of the planned acreage is planted compared to 48% in the five-year average.

Time is running out for corn
Despite showers last week, American corn growers have not been idle. Nearly half, namely 49%, of the planned corn acreage has been planted. Last week, 36% was planted and the five-year average for this week stands at 54%. Time is starting to run out for planting corn, warn some analysts. The optimal planting window for corn is the first half of May. The growth of the already planted corn is slightly ahead of the multi-year average according to the USDA. 23% is above ground compared to 21% in the five-year average.

Soybean planting is progressing fairly in line with the five-year average. Up to May 12, 35% has been planted compared to 34% in the five-year average. By this week last year, 45% had already been planted. Of the planted soybeans, 16% are above ground compared to 10% in the five-year average.

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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