Now that a new month has arrived, the problems for American farmers are piling up. The rainfall, hail and tornadoes make millions of hectares impassable. In many cases, maize can no longer be sown. It is also questionable whether soy will work.
The United States goes from one extreme to the next: snow, hail, floods, tornadoes and storms. It all passes. This leaves American growers of grain corn and soybeans at a loss, because only a little more than half of the corn acreage has been sown. This while the 5-year average for the end of May is 90%. At the end of May, 30% of all soya was in the ground, while the average is 66%.
Wheat also affected
On Monday, June 3 (American time), the United States Department of Agriculture (USDA) will publish new figures on the progress of sowing work. The insiders estimate that 70% to 75% have been sown at the beginning of June, while that is usually 95%. This will also provide more clarity about the status of winter grains. This product has had to deal with a lot of precipitation in Kansas and Texas, for example, which does not benefit its quality.
There are now great concerns, especially about grain maize that has yet to be sown. In the major corn states, plots are flooded and the land is far from passable. In the best case, it must remain dry for at least 1 week before arable farmers can get to work. Given the weather expectations, that is not possible. The growers are therefore puzzling over their options: not sowing or sowing late.
Crop insurance also plays a role in this. To collect the maximum premium, sowing must take place before a certain end date. The end date differs per state, but for many states the date is around June 1. Those who don't sow corn fall back on soy. This can be sown late.
Sow or not
Corn and bean growers must carefully assess the market, because does a higher price make up for a lower yield? On the last day of May, the American stock markets closed with a loss, due to news from American President Donald Trump. He announced a 5% import tax on all products from Mexico. Also the trade war with China flared up again. To support farmers, Trump announced that more ethanol could be mixed into gasoline, which is positive for the corn market.
When the stock markets opened in the United States, prices initially rebounded slightly, although they are back in the red on Monday afternoon, June 3. The market is waiting for new figures and is becoming increasingly interested in politics. However, the USDA will not announce the first acreage figures for this year until the end of June.
De Matif in Paris it closed higher on Friday, May 31: €185,25 per tonne for the September contract. On Monday afternoon, June 3, it is trading at €186,25, with the December contract also trading €1 higher at €189,75 per tonne.
Europe unchanged
There are currently two voices in Europe. FranceAgriMer leaves crop ratings for wheat and spring barley unchanged this week. The assessment of winter barley increases by 2% and grain maize decreases by 1 percentage points. There is also a positive story from Germany, after local precipitation fell and more rain is expected this week.
However, the question remains how long this noise can last. Drought and heat are predicted for the first half of June: not only in Europe, but also in Russia and Ukraine. That drought could last throughout June. This causes analysts to adjust their expectations for the harvest in these countries downwards. A small reduction is expected for Ukraine. There, the winter wheat harvest starts around June 15, which is 1 to 2 weeks earlier than normal.
Influence from Russia
The Russian yield figures are very important for the grain market on the European continent. The recent reductions have all been made based on positive expectations from this country. It puts physical trading prices on a firmer footing and could move the market on our side of the ocean.