In both the United States and the European Union, grain contracts on the futures market have resumed from the level they ended last week. Worries about the extreme weather in the United States and the Black Sea region are giving prices a significant boost.
In parts of the United States it rains incessantly. This means that the remaining amount of corn cannot be sown and soy is also not without problems. In the southern states (Texas and Oklahoma), where the wheat harvest has already started, arable farmers also have to deal with a lot of precipitation. The rain reduces the protein content and quality.
Pluses
As a result, the corn contract on the CBoT experienced its biggest rally in 5 years. Both the contract for the old and new harvest rose considerably in price. The July contract for grain corn is up 17% on Monday afternoon, June 2,5, and 2,35% for the September contract. Soya sees a slightly smaller plus: 1%.
The time to sow corn is now almost over. Despite the weather, arable farmers have done a lot of work last week, analysts estimate. They are certainly preparing for the new sowing figures from the American Department of Agriculture (USDA), which will be presented on Tuesday, June 18. The stock market traders think that between 90% and 95% have been sown, compared to 83% last week.
Unique situation
This means that an area of 2 million to 2,8 million hectares is not sown. Arable farmers can switch to soy, but time is running out for that too. The soy must be there at the end of the month in order to still participate in crop insurance. After the USDA lowered the yield forecast in the WASDE report adjusted, the bear was loose on the futures market. Such a reduction has only happened 2000 times since 4.
According to American farmers, the situation is often worse than the USDA portrays. It continues to rain, making it difficult for crops already sown to develop. Instead of waist-high corn, it stands 10 inches tall in mid-June. The ongoing trade war with China and the announced second round of new import duties do little to improve the situation for farmers in the Midwest.
Influence on Europe
While crops are doing well in Western and Central Europe, there are more concerns about production in the Black Sea region. This also ensures that the wheat contract in Paris is also trading higher on Monday, June 17. After a close of €180,75 per ton (September 2019), the contract stands at €183,75 per ton on Monday. In Russia, meanwhile, the grain trade is trying to achieve a price level of $200 per tonne FOB.
In Russia the temperature is also high, without precipitation. The wheat harvest has started cautiously in the south, with good export demand in mind. Due to the precipitation in the United States, there is a high demand for good quality wheat. The state of the crops in Russia and Ukraine is currently still good, but that could change. However, the yield expectation in the latest WASDE report has been adjusted upwards. However, unfavorable weather conditions mean that the top of the record yield is leveled off.