From drought and frost in Russia, the focus on the wheat market is now shifting to the prairies in the US. The potential for good yields in winter wheat is evident from the initial results of the Crop Tour. Conab from Brazil came with new yield expectations. Soybeans stand out; the severe weather and floods in Rio Grande do Sol are not reflected in those figures.
The September contract for wheat on the Matif took a step back yesterday and closed €9 lower at €249.75 per ton. There was also a correction on the CBot after the significant rise. The July contract for wheat dropped by 2.1% to $6.72½ per bushel. Corn lost 1% and ended at $4.67½ per bushel. Soybeans, as almost usual in recent days, remained the most stable factor and decreased by 0.4%. This brought the closing price to $12.14½ per bushel.
Weather continues to be the main driver in the wheat market. The focus of market players has shifted from the problems of drought and frost in Russia to the wheat in the US. Earlier this week, the USDA provided an indication with the Crop Progress report. Half of the winter wheat in the US is rated good or excellent. This is the same as last week and the best condition since 2020. Some weather models predict rain for the southwestern part of the prairies. Although it is not certain that this rain will fall, it is a dampening factor on the wheat market.
This week, the Kansas Wheat Quality Tour has started. The yield potential is good for the central-northern part of Kansas, as indicated by the initial results of the tour. Analysts expect good yields in Oklahoma and the southern part of Kansas due to rain.
Forgotten floods in Brazil?
Conab released new yield expectations for Brazil yesterday. The figures from the agency under the Brazilian Ministry of Agriculture were surprising. The expected soybean production is projected at 147.7 million tons, compared to 146.2 million tons in last month's forecast. This is well below the 154 million tons estimated by the USDA. The surprise is that the floods in the southern province of Rio Grande do Sol do not seem to have been taken into account. Conab maintains the yield at 21.4 million tons. Various private market agencies and analysts predict soybean production in Rio Grande do Sol at or below 20 million tons.
The corn harvest in Brazil is estimated at 111.6 million tons by Conab. This is 700,000 tons more than the previous forecast. The higher yield is mainly due to better expectations for the second corn crop, the safrina harvest. The yield for the following corn crop is now estimated at 86.2 million tons. However, Conab has revised down the expected wheat yield to 9 million tons. This is 7% less than the previous forecast, mainly due to a smaller area likely caused by the floods in Rio Grande do Sol.
Setback for soybeans
In the US, the soybean sector is unhappy with Biden's decision to exclude used cooking oil from China from the list of products subject to higher import tariffs. Used cooking oil is a substitute for soybean oil in biodiesel production. Analysts perceive the Biden administration's decision not to increase the import tariff on used cooking oil as a bearish signal for soybeans.