Analysis Grains

The search for a new balance on the wheat market

May 23, 2024 - Jurphaas Lugtenburg

On the wheat market, the search for a new balance continues. In Paris, the rise continued yesterday, but momentum of the rally is weakening in Chicago. Bearish news for wheat came from Canada. In Brazil, soybean exports are suffering due to the devastating floods in the south of the country.

The September contract for wheat closed €2.25 higher at €259.25 per ton yesterday. Wheat showed a small correction on the CBoT and closed 0.6% lower at $6.93 per bushel. Corn and soybeans closed in the green on the Chicago exchange. Corn closed 0.7% higher at $4.61¼ per bushel. Soybeans ended 0.8% higher at $12.46¼ per bushel.

The momentum of the rally in the wheat market is slowing down. Analysts believe that the frost and drought damage to wheat in the Black Sea region is largely priced in. The Russian central bank warned yesterday that the rising grain prices increase the risk of inflation.

Especially in Chicago, a new balance is being sought on the wheat market. After the significant rise earlier this week, speculators are pulling out and interest among physical sellers is increasing to hedge at this level. Analysts are not nervous about yesterday's decline. Tunisia secured 100,000 tons of wheat in a tender at $273.69 per ton C&F. The origin of the wheat has not been disclosed.

LSEG released a new yield forecast for wheat in Canada yesterday. The agency estimates the wheat yield for the upcoming harvest at 34.3 million tons, which is 7.5% more than last season's harvest. The higher wheat yield is partly due to an expansion of the acreage and partly due to higher yields.

Disrupted Chains
AgroConsult estimates the second corn crop - the Safrinha crop - in Brazil at 96.7 million tons, which is 10% lower than last season. Particularly in the states of Parana and Mato Grosso do Sul, the weather is not favorable for corn growers. Further south, in Rio Grande do Sul, Cogo reports that 2.5 to 3 million tons of soybeans have been lost due to the devastating floods. Soybean exports are also delayed by the floods. The peak of the Brazilian soybean export season is from March to June. Due to logistical problems, Brazilian exporters are putting a premium on soybeans. Several major buyers are therefore turning to cheaper suppliers. The expected soybean export in May for Brazil has been reduced from 14.13 million tons to 13.83 million tons.

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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