Analysis Grains
Drought in Russia delays sowing of winter wheat
In Russia and Ukraine, sowing of winter wheat is delayed due to drought. Russia has the slowest start of the sowing campaign in eleven years. China has announced the intervention prices for wheat for the domestic market. In contrast to the movement on the free market, the intervention price for Chinese wheat growers has been slightly increased. In the US, a group of Republicans and Democrats want to stimulate domestic production of biofuels.
The December contract for wheat on the Matif closed €1.75 higher at €220.50 per ton yesterday. The CBoT also closed in the green overall in the last trading session. The biggest increase was for wheat, which rose by 1.9% to $5.89¼ per bushel. Corn closed 0.9% higher at $4.15¼ per bushel. Soybeans, sitting between the grains in terms of increase, closed 1.1% higher at $10.53¼ per bushel.
Drought in the Black Sea region particularly boosted wheat. According to SovEcon, 8.3 million hectares of winter crops have been sown in Russia. This is 1 million hectares less than a year ago, making it the slowest sowing campaign in eleven years so far. Due to drought in the south of Russia, growers there are sowing at a slower pace, including winter wheat and rapeseed, according to the market bureau. In Ukraine, the sowing of winter wheat is also behind last season. According to the Ukrainian Ministry of Agriculture, a little over 880,000 hectares have been sown now compared to 1 million hectares at this time last year. Like in Russia, a lack of moisture in the ground is causing delays here as well.
Estimates for the upcoming wheat harvest in Argentina vary widely. LSEG came out yesterday with an estimate of 17.2 million tons. The Buenos Aires Grain Exchange later came up with a more optimistic estimate of 18.6 million tons. The USDA was in between earlier this month with a yield forecast of 18 million tons of wheat for Argentina.
Intervention
The Chinese Central Planning Bureau has announced the intervention prices for wheat in 2025 and 2026. The minimum price will be 119 yuan per 50 kilograms, equivalent to approximately €304 per ton. In 2024, the intervention price was 118 yuan per 50 kilograms, or about €302 per ton. In 2025 and 2026, the Central Planning Bureau aims to buy a maximum of 37 million tons of wheat, similar to this year. If the wheat price on the free market falls below the intervention price, the Chinese government will buy wheat directly from growers at the minimum price.
In the US, a group of Republicans and Democrats have introduced a bill to promote the use of American raw materials in biofuel. The bill, aptly named the Farmer First Fuel Incentives Act, provides a tax credit for biofuel made with locally produced raw materials. Canola from Canada or imported 'used cooking oils' would not qualify for the tax benefits if the bill is passed.
