Analysis Grains

No fresh feed for the bulls in the grain market

May 30, 2024 - Jurphaas Lugtenburg

Players in the grain market had the opportunity during the last trading session to carefully consider the recent harvest forecasts from Europe and the Black Sea region. A correction followed. The focus is very much on production, but there are also developments to report in terms of demand. India may possibly reopen its borders for wheat starting next month to replenish state reserves. Concerns about demand development for corn and soybeans arise due to factors outside the agro-complex.

The September wheat contract on the Matif closed €1.50 lower at €263.25 per ton yesterday. Prices on the CBoT also closed in the red. Wheat closed 1.1% lower at $6.92¾ per bushel. Corn lost 1.6% and closed at $4.55¼ per bushel. Soybeans also ended lower, losing 1.3% to $12.14 per bushel.

The wheat market is cooling down. SovEcon released a yield forecast for wheat in Russia yesterday. The bureau reduced the expected yield from 85.7 million tons in the previous forecast to 82.1 million tons. The frost in early May caused more damage than expected. Andrey Sizov, the director of SovEcon, mentioned in a letter to clients that the current growth conditions are challenging. "In many key winter wheat regions - including Rostov, the largest wheat area - it is too dry."

Rain is forecasted for southern Russia. Whether the grains can benefit from it is uncertain according to various experts. The temperatures are also rising, and wheat simply does not thrive in very warm weather.

Heat in India but rain on the way
It was extremely hot in India. In the northwestern state of Rajasthan, the temperature reached 50.5 degrees Celsius. This is just short of a national record according to the Indian Meteorological Department. The record stands at 51 degrees in the same region in May 2016. The weather department expects an early monsoon this year. This week, the first rains are expected in southern India. They are likely to move towards the northwest. The temperature is expected to decrease accordingly, according to the Indian Meteorological Department.

Not only the weather in India is keeping players in the grain market busy. Various sources report that India is likely to abolish the 40% import duty on wheat in June. This move would open the door for wheat from Russia and aim to build up government stocks. For the first time in six years, India would then import wheat again.

Good start to the growing season in the US
In corn and soybeans, the growth conditions in America dominate the sentiment. The weather forecasts are very favorable for the early development of these crops. This sets the stage for good yields. The moderate sentiment in corn and soybeans is further influenced by developments outside the agro-complex. Oil and energy are under pressure, affecting the demand for soybean oil for biodiesel and corn for ethanol production according to some experts. American exporters also struggle with the relatively strong dollar.

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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