Week 23: Wheat price rally tempered

Also in Russia the wheat harvest has begun. According to farmers, the yield in the south of the country is half lower than last year. This is mainly due to the drought, but also to the extreme rainfall. Frost was also reported in various places in the country in mid-May. Traders are already noticing that the harvest is significantly lower. This is not bad for Russian farmers, because they are paid almost 50% more than last year.

It is also extremely warm (40 degrees) in the Southern Plains and little rain has fallen. As a result, the condition of the crop has become even worse. These conditions are also reflected in the expectations of the International Grains Council (IGC) for global wheat production. This will probably amount to 742,2 million tons, more than 2% lower than last year. Consumption is expected to be around 745,5 million tons, an increase of 0,7%. This means that the world wheat stock will decrease by 3,2 million tons to 258,4 million tons.

German harvest smaller
It is also extremely dry in Australia, but there will be rain there in the short term stir expected. Various cooperatives estimate that the German wheat harvest will be lower than last year. They expect a yield of almost 23 million tons, compared to 24,5 million tons in 2017.

(Text continues below the chart)The wheat quotation on the Matif in Paris shows a turbulent picture.

Good appreciation of the corn harvest
The corn price continues to fall sharply. The CBoT in Chicago reached the lowest level in 2 months. The strong decline can partly be explained by the favorable weather in the United States (US) and an exceptionally good appreciation of the corn harvest.

The US corn crop was in 78% good to excellent condition last week, compared to 68% last year. It was also announced on June 6 that Europe taxes corn from the US at 25%; this as a countermeasure to the tariffs that American President Donald Trump has imposed on European steel.

Soybean price drops
There is a downward trend in the soybean market. Since the end of weekend 22 the quotation has fallen from $380 per tonne to $367 per tonne. This has to do with the favorable harvest conditions in the US and the trade tensions between China and the US.

Meanwhile, Argentina is buying soybeans from the US for the first time in 20 years. This is strange because Argentina is the third largest producer. It is a result of the reduced production in the country (-16 million tons) due to extreme drought. The final harvest will therefore probably be less than 40 million tons.