The grain market is in a real weather market at the moment. This means that the weather forecast largely determines which way the course moves. Low temperatures and night frost in Europe are causing slow development of cereal crops. The weather is also being watched closely in North America.
The extremes in the United States and Canada are often much greater than we see in (Western) Europe. Analysts and farmers across the U.S. are eagerly watching weather reports in the Midwest and High Plains. It remains unusually dry there for this time of year and the temperature is also relatively low. Some precipitation has fallen locally, but much of it remains very dry. The cold weather is not yet causing many delays, but the lack of precipitation is a concern.
Growth slowed
In Europe, last week's cold mainly damaged rapeseed. In France there is talk of damage on a large scale, where many tens of thousands of hectares of beets also have to be resown. Winter wheat can handle night frost. Low temperatures at night and during the day mainly ensure that the crops develop slowly. Government agency FranceAgriMer remains as positive about the status of the crops for the time being. Only the recently sown spring barley is less positive.
In Russia, winter grains are coming out from under the snow as temperatures continue to warm and spring arrives. There is frost damage on a small scale, but this is not really a problem. Various analyst firms have therefore adjusted their harvest expectations upwards. Rain in the south delays the sowing of summer grains and in central Russia plots sometimes have to be oversown because winter wheat did not develop properly last autumn. This is the result of prolonged drought. In Ukraine, grain maize has now been sown. Due to tight availability of maize, pressure on this crop is greater this season.
Higher physical prices
The grain futures markets managed to recover significantly last week. This also happened in Paris, where the price of the May contract had to drop again on Monday afternoon and was trading at €215,25. The September contract stands at €206,75. As a result of a higher futures market, physical prices also rise. This happens, among other things, in the Black Sea region, despite the export taxes. New figures from the USDA - published on Friday, April 16 - predict a decline in world wheat production by 5,5 million tons. Political tensions between Russia and Ukraine are also reflected in the grain market. Analysts and traders worry they could limit logistics.
Corn and soy prices ended sharply higher last week. On the CBoT, grain maize is at its highest price level in 8 years and there is a record size net long position (expectation of price increases). Dry weather in South America and the US helps to further increase price levels, together with high consumption and good exports. The export of Brazilian soy to China is now running at full speed. This means the country is heading for a record.
Weather reports
The weather reports now largely determine the trend. The temperature and precipitation in North and South America and the European continent are of great importance for the development and sowing of crops. This mainly has consequences for the prices of the new harvest. If it becomes available later, the remainder of the old harvest can also benefit from it.