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Analysis Grains

Russia causes unrest in wheat market

June 18, 2024 - Jurphaas Lugtenburg

In the Netherlands and a large part of Europe, we may be waiting for a period of drier weather. Players in the grain market reacted in the last trading session to rain in the weather forecasts. Rain has fallen in the Black Sea region, reducing drought stress in the grains, and in the US, warm, dry weather in the cornbelt did not persist. This put pressure on prices across the board.

The September contract for wheat on the Matif closed yesterday €6.50 lower at €230.25 per ton. That is the lowest closing price in six weeks. Wheat also took a significant hit on the CBoT and dropped to the lowest point in two months. The July contract on the US exchange closed 3.5% lower at $5.91½ per bushel. Corn also closed in the red, losing 1.4% to reach $4.43¾ per bushel. Soybeans closed 1.9% lower at $11.57¾ per bushel.

Reports from Russia are putting pressure on the wheat market. Russian exporters are once again playing with prices. Ikar lowered the price for Russian Black Sea wheat by $8 to $234 per ton. According to SoveEcon, Russia exported 4.4 million tons of wheat in May compared to 4.6 million tons in April.

Is the rain too late?
There has also been rain in the Black Sea region in recent days. According to private agencies, only 25% of the wheat in the south of Russia is still experiencing drought stress. Experts are not entirely in agreement on whether the grains can benefit from the rain. The harvest is already approaching in the southernmost regions, and rain during ripening generally does not have a favorable effect on the quality of wheat and has only a limited effect on the final yield.

Significantly more winter wheat has been harvested in the US than analysts expected. The USDA's Crop Progress report shows that 27% of the acreage has been harvested. This time last year, it was 13%, and the five-year average is 14% harvested. Farmers in Oklahoma are the most advanced in harvesting, with 83% already harvested. In the largest wheat state, Kansas, 28% has been harvested. The condition of the remaining winter wheat has slightly improved. According to the USDA, 49% of the acreage in the US is rated good or excellent, up from 47% last week. For spring wheat, 76% of the acreage is rated good or excellent. The relatively good condition of the wheat, but especially the rapid pace of harvesting, is putting pressure on the American wheat market, according to analysts.

Corn and soybeans decline slightly
Almost all corn is already in the ground. Therefore, there is no more planting progress for this crop in this week's Crop Progress report. The condition of the corn has slightly declined according to the USDA. 72% of the acreage is rated good or excellent, down from 74% last week. Planting of soybeans is in the final stages. 93% of the planned acreage is planted, matching the five-year average. By this week last season, 97% of soybeans were planted. Like corn, the condition of soybeans has slightly declined. 70% is rated good or excellent, down from 70% last week.

Analysts attribute the slight pressure on corn and soybeans in the last trading session more to the weather forecasts than to USDA data. The warm, dry weather predicted for the cornbelt is not materializing. Instead, showers are expected, and it will remain cooler. This is favorable for the growth of corn and soybeans.

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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