Analysis Grains
Egypt enters the market for European wheat
In the tail end of the grain season, the demand for wheat is picking up. Algeria and Egypt closed two tenders yesterday for 800,000 and 470,000 tons respectively. Europe is also participating. StoneX expects a lower corn harvest in Brazil. Drought is causing yields to fall short in major growing areas.
There wasn't much movement in wheat on the Matif during the last trading session. The September contract closed €0.25 lower at €258.50 per ton. There was more action on the CBoT. Wheat in Chicago dropped by 2.2% to $6.58¼ per bushel. Corn and soybeans traded more sideways. Soybeans closed 0.2% lower at $4.42½ per bushel. Soybeans dropped by 0.5% to $11.79 per bushel.
The relatively early start of the wheat harvest in the US had a significant impact in Chicago yesterday. The Crop Progress report earlier this week showed that 6% of winter wheat has been harvested compared to 3% in the five-year average. Both summer and winter wheat in the US are relatively healthy.
EU squeezes in
Up to June 2, the EU exported 28.17 million tons of wheat. Last season, it was 29.56 million tons. The export is approximately 5% behind. There is demand for wheat from North Africa, and the Black Sea region does not have exclusive rights. The Egyptian state buyer Gasc purchased 470,000 tons of wheat in a tender. The majority of it comes from the EU. Romania is supplying 180,000 tons, France and Ukraine both 120,000 tons, and Bulgaria 50,000 tons. Prices in the Gasc tender range from $269 to $284 per ton FOB (free on board). Algeria bought 800,000 tons of wheat in a tender. According to various sources, this order is expected to be mostly filled with wheat from the Black Sea region. The price is around $280 per ton C&F (cost and freight). Jordan did not make a purchase in a tender for 120,000 tons that the country had open. Reportedly, Jordan found the prices too high.
Drought takes a toll in Brazil
StoneX has revised down the yield expectation for the next corn crop after soybeans by 3.9% compared to the May forecast. The market agency now estimates the harvest at 93.5 million tons. Drought in the provinces of Mato Grosso do Sul, Parana, and Sao Paulo has led to lower corn yields than expected. According to StoneX, in some cases, the yield is below 5 tons per hectare. The average yield of the next corn crop is estimated at 5.42 tons per hectare compared to 5.67 tons per hectare in the May prediction. About 75% of the Brazilian corn harvest comes from the second crop. The total corn harvest has been reduced by StoneX from 125.6 million tons in May to 121.75 million tons in the June forecast.
Grain exports from Argentina plummeted in May. The export value last month was $2.6 billion, which is 37% less than in May 2023 according to the Argentine Grain Exporters Chamber CIARA-CEC. New trade and monetary policies, weather influences, and a delayed harvest have led to lower exports, according to the chamber. Additionally, grain exporters and oilseed processors are facing low capacity utilization and negative margins. Strikes by, among others, dockworkers are exacerbating the issue, the chamber adds.
