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Analysis Grains

Start harvest in US puts pressure on wheat market

June 4, 2024 - Jurphaas Lugtenburg

No major fluctuations in grain prices during the last trading session, but that doesn't mean that peace is returning to the market. The weather remains the major uncertain factor. Yesterday, it was drought in Russia that made the news again. The Russian ministry also took a swipe at Europe. In the US, corn is doing well, as shown in the Crop Progress report. The start of the wheat harvest in the US is putting some pressure on the market.  

The September contract for wheat on the Matif closed €0.50 lower at €258.75 per ton yesterday. On the CBoT, wheat lost 0.8% and ended at $6.72¾ per bushel. Corn closed 0.6% lower at $4.43½ per bushel. Soybeans were the biggest decliner at 1.7%, ending at $11.84½ per bushel.

At first glance, it seems like a quiet trading day we've had, but according to some analysts, looks can be deceiving. The weather caused some underlying concerns. Warm and dry weather is predicted for southern Russia, eastern Ukraine, and western Kazakhstan. In central Europe, heavy showers in the weather forecasts may cause damage to crops.

Russia is considering declaring a state of emergency nationwide by the end of this week due to frost damage, according to Russian Minister of Agriculture Oksana Lut, as reported by the Russian state news agency Ria. The state of emergency would pave the way for claims by agricultural companies with insurance. Several regions have already locally declared a state of emergency. Lut is not yet attaching concrete figures to the damage caused by frost last month. The Russian Grain Union mentioned last week about 1.5 million hectares where damage was more or less significant. Through Russian media, the Russian Ministry of Agriculture also stated that they are not very concerned about the higher import tariffs from the EU. According to the ministry, there are enough other markets to export to.

Flying start of corn
The planting of corn in the US is well underway, as shown in the Crop Progress report from the USDA. 91% of the planned corn acreage is in the ground. The five-year average for this week is 89%, but last year, 95% had already been planted. 74% of the corn is above ground, just above the five-year average of 73%. This week, the condition of the corn was also included for the first time. 75% is rated good or excellent compared to 64% last year. 78% of the planned soybean acreage has been planted, compared to 73% in the five-year average and 89% last season. Over half, namely 55%, of the soybeans are above ground. Last year at this time, it was 69%.

Winter wheat in the US is looking slightly better than last week. 49% of the acreage is rated good or excellent, up from 48% last week. Last season, only 36% received a good or excellent rating. 74% of the spring wheat acreage is rated good or excellent. Last season, it was 64%. The winter wheat harvest has already begun in the US. 6% of the acreage has been harvested, compared to 3% at this time last year. Texas is the most advanced with 33% combined. The drop in wheat on the CBoT is believed by various analysts to be related to the start of the harvest. The direct sale of wheat is also putting some pressure on the futures market.

Good prospects for Australian wheat
The Australian economic institute Abares released a new yield forecast yesterday. For the 2024/25 season, Abares expects an Australian wheat harvest of 29.1 million tons. This is 12% more than last season and 10% above the five-year average. The canola harvest is estimated to be lower, at 5.4 million tons. This is 5% less than last season but 21% above the ten-year average.

In Europe, rapeseed is suffering from the wet weather. Strategy Grains has reduced the harvest expectation for the EU by 180,000 tons to 17.9 million tons. If realized, the harvest would be 10% smaller than last season, mainly due to water damage in France and frost damage in central Europe. The expected sunflower harvest in the EU has been reduced by 30,000 tons to 10.7 million tons. The soybean yield is also lower according to Strategy Grains, going from 3.11 million tons to 3.06 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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