Analysis Grains
Weather premium raised in grain market
Drought, drought, and more drought; we can hardly imagine it anymore with rain back in the weather forecasts. But in the Black Sea region, precipitation would be more than welcome. In the Balkans, the corn is suffering from drought, and the newly sown winter wheat in the east of Ukraine and west of Russia is not taking off due to a lack of moisture. In Brazil, farmers are postponing the sowing of soybeans awaiting rainfall.
The December contract for wheat on the Matif closed €4.25 higher at €220.25 per ton yesterday. The new week also started in the green on the CBoT. Wheat rose by 2.5% to $5.82½ per bushel. Corn rose slightly more than wheat, increasing by 2.9% to $4.13½ per bushel. Soybeans traded among the grains during the last trading session and closed 2.7% higher at $10.39¼ per bushel.
Players in the grain market are becoming obsessed with the weather forecasts. Rain is predicted in our part of the world. Towards the end of the week, temperatures will drop, and showers are expected. Depending on the amount of rainfall, the sowing of winter wheat may be delayed. However, this is not something to be nervous about just yet.
Will the wheat take root before the frost arrives?
More serious are the problems with drought in the east of Ukraine and the west of Russia. It has been warm and dry there for a few months. These are certainly not the ideal conditions to get winter crops growing. According to various experts, it is crucial that the wheat starts growing there now. The time until the first frost is limited. Frost often arrives by the end of October, and ideally, there should be a crop by then. While overly developed crops are not ideal for winter survival, wheat that is just sprouting is even more susceptible to winter kill according to local sources.
The Ikar price for Russian Black Sea wheat remains relatively stable. This week, Ikar set the price at $217 per ton, which is $1 higher than the previous week. According to SovEcon, Russia exported 910,000 tons of grain last week compared to 1.06 million tons the previous week. Of the grain exports last week, 840,000 tons were wheat. SovEcon expects Russia to export 4.8 million tons of grain this month, down from 4.9 million tons in September 2023.
In the east of the EU, in the Balkans, it is dry. The Joint Research Centre (JRC) of the European Commission has further reduced the yield expectation for maize in that region. In the Mars bulletin, the JRC now expects a maize yield of 6.84 tons per hectare, which is 3% lower than in the August edition of the report and 7% below the five-year average. Last season, 7.51 tons of maize per hectare were harvested; this season is expected to be 9% lower.
Corn and soybean conditions in the US remain stable
In the US, the market was also focused on drought yesterday. Rain fell over the southern prairies where much wheat is grown last weekend, but further north in the corn belt, it remained dry. Despite this, the condition of corn and soybeans in the new Crop Progress report remained unchanged. According to the USDA, 65% of corn is rated good or excellent, and 64% of soybeans receive that rating. The harvest of both crops is progressing fairly smoothly at this stage. 14% of corn has been harvested compared to 13% at the same time last year and 11% in the five-year average. Soybean harvest is slightly ahead, with 13% of the crop harvested. The five-year average is 8%, and last year saw 10% harvested.
The harvest of spring wheat and barley in the US is almost complete, with 96% and 97% harvested, respectively. A quarter of the planned area for winter wheat has been sown. Last year, 23% was sown, and the five-year average is 24%. American farmers are making good progress with the sowing of winter wheat.
Waiting for better weather in Brazil
The theme of drought also arises in Brazil. According to AgRural, only 0.9% of the planned soybean area in the South American country has been sown. Farmers are eagerly awaiting rain as there is currently little moisture in the ground, causing farmers to hesitate to sow soybeans. More progress has been made with the first corn crop. 26% of the planned corn area has been sown according to AgRural. However, work has come to a halt there as well, awaiting rain.
