Analysis Grains

Balance on the European wheat market is vulnerable

June 14, 2024 - Jurphaas Lugtenburg

There are concerns about wheat in the EU. After the USDA earlier this week, Strategie Grains came out with a new harvest forecast yesterday in which expected yields have been revised downwards. The bureau even dared to predict that the wheat market will return to a vulnerable situation. In the US, corn reacted to the weather reports. Warm and dry weather is not what market players are hoping for. However, drought is not an immediate problem, as shown by the drought monitor.

The September contract for wheat on the Matif closed €1.50 lower at €238.50 per ton yesterday. On the CBoT, prices closed in the green. Wheat increased by 0.5% and reached $6.20 per bushel. Corn closed 0.9% higher at $4.58½ per bushel. Soybeans rose slightly more than corn, recording a 1% increase. The closing price was $11.28½ per bushel.

Strategie Grains further lowered the yield expectation for wheat in the EU. The bureau now estimates the European wheat harvest at 121.8 million tons. This was 123.5 million tons in the previous forecast from May. Strategie Grains estimates the Russian wheat harvest at 78 to 80 million tons, down from 89.9 million tons in the previous estimate. The USDA estimated the European wheat harvest earlier this week at 130.5 million tons and the Russian harvest at 83 million tons.

Precarious balance
Strategie Grains expects France to see the largest decline in wheat yield compared to the previous season. This is followed by Germany, Poland, and Hungary. The first wheat has been harvested in southern Spain, with good yields. The market bureau expects lower yields in northern Spain. Strategie Grains anticipates that in the 2024/25 season, Europe will tap into its wheat stock. "There seems to be more interest in European wheat than previously expected, partly due to disappointing supply from Russia," the bureau writes. Strategie expects the market to 'return to a rather vulnerable situation'.

Soybeans received a boost from the USDA news that 120,000 tons have been exported to an unknown destination. Some analysts suspect China is the buyer. However, the weekly export was at the lower end of trade expectations. In corn, the weather premium is cautiously increasing. Weather reports indicate warmer weather for the American Midwest. The big uncertainty is whether there will be rain or not. The US weather model predicts above-average rainfall, while the European model suggests dry conditions in the Midwest.

Drought not a concern at the moment
For now, the precipitation deficit is being alleviated in the US, as shown by the new drought monitor. Only 1% of soybeans are in an area experiencing drought, and 2% of corn. This was 2% and 3% last week. By this week last year, 57% of corn and 51% of soybeans were facing drought. Only in wheat in the US is there a significant drought issue. 16% of winter wheat is in a drought area. This was 21% last week.

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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