A drop in crop condition pushed grain prices higher on Wednesday. The drought also appears to be affecting the wheat harvest in Russia, where the harvest estimate is being lowered. The use of maize and soy in biofuels is increasing less than previously expected.
The September contract for wheat on the Matif closed €8 per tonne higher at €247 per tonne on Wednesday. At the CBoT in Chicago, the July contract closed at $7,34 per bushel, up from $3,80 per bushel. The September wheat contract on the CBoT closed higher at $7,48 per bushel.
Wheat prices were on the rise due to news that SovEcon is adjusting the estimated Russian wheat harvest downwards. Previously, a harvest of 88 million tons was assumed, now it is 86,6 million tons. Drought in the main spring wheat growing regions is one of the causes.
In the US, drought also plays a role in the wheat market. The wheat market benefits from the rising price of soy and corn, which are under pressure. Meteorologists are predicting no significant rain in the US Midwest in the coming weeks.
In China the wheat harvest is almost over. It was expected that 137 million tons of winter wheat would be harvested, but heavy rains and strong winds in the important growing province of Henan threw a spanner in the works in early May. As a result, around 20 million tonnes (15%) of the total production is unfit for human consumption and can only be used as animal feed or to make alcohol.
The wheat that sprouts due to the rain is popular with feed manufacturers who can pick it up for between 2.300 and 2.400 yuan ($291 - $303) per tonne. A lower amount than the 2.820 yuan ($357) per ton normally charged for quality wheat in the region. Moreover, the germinated wheat is also cheaper than corn.
Corn Belt
The July CB corn contract closed higher at $6,71 per bushel, and the September contract was also on the rise, closing at $6,23 per bushel. The corn market soared due to worse than expected crop conditions in the US.
Iowa and Illinois, the most important corn states in the US, saw a sharp decline in crops with good to excellent condition and an increase in those with poor to very poor condition. Given the situation, according to traders, it does not appear that the USDA harvest estimates will be met. As long as it remains dry in the region, the price has little choice but to rise further.
In Ukraine, a significantly lower sunflower oil production may not bode well for corn cultivation in the country, it is predicted.
The US government announced on Wednesday how much biofuel oil processors must blend into regular fuel over the next three years. For corn-based ethanol, among other things, this is a lot lower than farmers had hoped.
soybean cultivation
The July soybean contract closed higher to $15,15 per bushel on Wednesday. The August contract closed higher at $14,45 per bushel. Like the other grain market, the soy market also closed higher on Wednesday due to a reduction in crop conditions. In the background, the global supply of edible oils could be about 6% lower due to the conflict in Ukraine.
American soy farmers are disappointed now that it appears that the biodiesel mandate, which determines how much biodiesel must be blended into regular diesel, is lower than expected. Biodiesel is made from, among other things, soy.