The grain market is mainly concerned with assessing the maize and soy situation. There is a little less attention for wheat, where the mood can best be designated as neutral. Due to high maize prices, wheat has become very interesting for the feed market.
The 'Planting intentions'investigation report from the American Department of Agriculture, USDA, is still keeping the market busy almost a week after publication. Analysts speak of a hectare Houdini act, after the government came out with significantly lower acreage figures than had been taken into account. The area of corn is 2,2% lower than expectations and stocks are higher. Analysts simply cannot believe the numbers. With the bulls in charge, the mark was driven higher.
Wheat figures go unnoticed
Stock market traders were so busy processing this news that an increased wheat area (18,8 million hectares, +4,5%) went largely unnoticed. The wheat stock is also almost 3% higher than analysts expected. In Paris, the Matif already gathered for the publication of the report. On Thursday, the CBoT also traded higher. Tuesday April 6 is only the second trading day this month. In the afternoon, the price of the May contract turns green again at €210 per tonne. The September contract for the new harvest stands at €197,50, which continues to shadow the ceiling of €200.
Even with a larger corn area, the supply and demand situation remains extremely precarious. A problem in the new harvest can immediately cause a strong upward movement in the market. The USDA estimates the country's corn stockpile at 1 million tons as of March 195,62. That is 3% less than last year and very bullish. In the US, corn consumption (processing, ethanol, animal feed) is at an extremely high level. The use of corn in animal feed is at its highest level in 3 years. In addition, there is the Chinese import of American corn, due to a lack of product from South America. The new corn crop (safringha) is in the ground in Brazil, but the growing conditions are far from optimal.
Wheat interesting as animal feed
With these facts in mind, there is a very good chance that corn will remain expensive and experience a volatile trend. A record size net-long position on the CBoT for corn (expectations that the price will rise) confirms this feeling. This makes it more interesting to use wheat as animal feed. China, due to a lack of corn, has already sold 42 million tons of wheat through state auctions for use in animal feed. An additional advantage of wheat in the ration is the higher protein percentage compared to maize, so that less soy meal needs to be added.
For wheat, the weather is now the most important factor determining price levels. Spring on the European continent has started early and the growing conditions are good. The situation in Russia varies, but on average the winter grains have survived the winter well. This also applies to Ukraine. In the US, winter wheat levels are average, compared to the 5-year average, the USDA reports.
Cold does not (yet) affect the market
April remains relatively cold in Europe for this time of year, according to weather forecasts. If this weather continues for a longer period of time, it could affect the market. However, the chance is not that great. A dry period later in the year has a greater impact on price formation. In the US it is cold again in the east, while the west is mainly warm. The weather in Australia is also important for the wheat market. Sufficient rain must still fall there before a new harvest can be sown. In Russia, the sowing of spring grains has only started very carefully. Three quarters less has been sown than last year at the beginning of April.
The Egyptian state agency GASC has issued its first tender for the 2021 harvest year. It is striking that this is still largely filled with supply from Russia, despite the unpredictable export tax. Exporters believe that they can pass on the risk of this tax to the grower by purchasing at a low price. The lowest bids come from Romania.