Analysis Grains
Wheat in Kansas still faces challenges
Players in the wheat market give the impression of not knowing how to proceed. After bearish news from Russia about less damage from frost earlier this month and high expectations for winter wheat in Kansas, a somewhat stronger correction would not be illogical. Uncertainty about the yield potential of winter wheat continues to dominate.
The September wheat contract on the Matif lost €2.25 yesterday, ending at €248.25 per ton. There were no major shifts in wheat on the CBoT. For a change, you could add. The July contract fell by 0.4% to $6.63¼ per bushel. Corn closed 1.2% lower at $4.52 per bushel. Soybeans saw a slight increase and closed 0.2% higher at $12.16¼ per bushel.
The frost damage in winter wheat in Russia seems to be less severe than expected. According to the Russian Ministry of Agriculture, 830,000 hectares of winter wheat have been frozen. This is approximately 1% of the total area. Several analysts do not rule out the possibility that Russia may revise this figure in the coming period.
Concentration of Power
In recent years, a significant consolidation has taken place among Russian grain exporters, according to Dmitry Rylko, director of Ikar, in a video conference at GrainCom. The four largest exporters now control 75% of Russian grain exports, up from 45% six years ago. Rylko would not be surprised if one of the exporters holds half of the export volume from the Black Sea terminals in the upcoming season. Rylko expects competition to increase in the Sea of Azov, both via coasters and through the Kavkaz seaport. Exporters will particularly want to make their mark in Kavkaz, where a quarter of the export capacity was controlled by TD Rif. This company has fallen out of favor with the Kremlin.
The Winter Wheat Tour in Kansas has concluded. Over three days, 449 winter wheat fields were visited across the state. The average yield is estimated at 46.5 bushels per acre (approximately 3.1 tons per hectare). For comparison, the USDA estimated the wheat yield in Kansas in the Wasde report at 38 bushels per acre (approximately 2.6 tons per hectare). Romulo Lollato, professor of agronomy at the University of Kansas, explains in the tour commentary that the yield figures are based on the current potential of the crop. With two to four weeks remaining until harvest, there is no certainty. "It is the yield we could achieve," writes Lollato. "If it cools down in Kansas with sufficient rain during grain filling, we can fully realize the potential of the crop. But a lot can still go wrong before the wheat is safely stored in the silos." According to Lollato, 46.5 bushels per acre is on the high side.
The new drought monitor shows that the race is not yet over for wheat in Kansas. The southern part of Kansas, northern Oklahoma, and a strip of Texas are still dry. This happens to be the main winter wheat growing region in the US. About a quarter of winter wheat in the US is in a too dry region.
In Argentina, dry weather is expected, and more importantly, cooler weather is on the way, according to the Buenos Aires Grain Exchange. Especially corn growers can benefit from lower temperatures. Due to high temperatures, leafhoppers have multiplied rapidly earlier this season. To make matters worse, the insects also transmit viruses to the corn. The damage to corn was estimated at $2 billion earlier this month by the Ministry of Agriculture. It is hoped that lower temperatures will reduce insect pressure.
