Analysis Grains

The weather is the foundation of the wheat market

May 24, 2024 - Jurphaas Lugtenburg

The IGC came out with the new forecasts for the grain harvest yesterday. Both wheat and corn are performing worse than expected last month. The new drought monitor shows that it is particularly dry in the wheat areas in the US. The Crop Tour in the American state of Illinois indicates that wheat has the potential for a record yield.

The September contract for wheat on the Matif closed €1 lower at €258.25 per ton yesterday. On the CBoT, wheat rose by 0.7% to $6.98 per bushel. Corn also showed a modest increase of 0.6% to $4.64 per bushel. Soybeans lost some ground and closed 0.6% lower at $12.39¼ per bushel.

The International Grains Council (IGC) estimates global wheat production for the 2024/25 season at 795 million tons. That is 3 million tons lower than the previous forecast in April. The USDA, earlier this month, projected a wheat harvest of 798 million tons, the same as the previous IGC estimate. The corn yield expectation has been reduced by 6 million tons to 1,220 million tons. However, the demand for corn remains high. As a result, the expected ending stocks of corn have been lowered from 291 million tons in last month's forecast to 281 million tons this month.

In the US, it is mainly winter wheat that is suffering from drought. A quarter of the winter wheat is in an area marked as dry on the drought monitor. Last season, this was 47% of the acreage. Kansas and the eastern parts of Oklahoma and Texas could really use some rain. In the cornbelt, they have had occasional showers this season. The moisture reserves in Iowa may not be completely replenished yet, but it could be worse. 10% of the corn and 7% of the soybeans are in a dry region.

In Illinois, a record wheat yield is possible. This is indicated by the Crop Tour held there, with a yield potential of 104.8 bushels per acre (approximately 7 tons per hectare). Last year, Illinois harvested an average of 87 bushels per acre (approximately 5.9 tons per hectare) according to the USDA. This season, the USDA expects 83 bushels per acre (approximately 5.6 tons per hectare).

The soybean harvest in South America is progressing steadily. According to the grain exchange of Buenos Aires, 14% of the soybean area was harvested last week, bringing the total harvest to 78%. In the Brazilian province of Rio Grande do Sul, farmers are still trying to salvage what they can of the soybean crop. Sources suggest that 90% of the soybeans have now been harvested there.

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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