Rarely has spring wheat in North America been in such bad shape as this year. The yield is expected to halve. Yet we hardly notice this in Europe. How is that possible?
With precipitation expected, the American futures market CBoT fell sharply in recent weeks. Since July 1, the corn price in Chicago has been in free fall. The July contract lost almost $35,50 per tonne in 9 days. It should be noted that trading in all commodities is marginal. The expiration date is near. For corn and soy there is still the August contract (old harvest). With wheat it is already about the new harvest.
Waiting for new figures
A sharp drop in the price of corn, in particular, caused stock traders to hunt for bargains on Monday afternoon (European time). The European Matif quotation is also turning green again. Wheat and corn rose slightly. Oilseed rape is on the rise. The futures markets are mainly awaiting new figures from the USDA. The new WASDE report will be published today (July 12). That should provide the direction that the market is clearly looking for.
The most important part of the report is the Ministry of Agriculture's estimate for grain corn and soy. At the end of June it was announced that the acreage was growing less rapidly than analysts and traders thought. But what about the yield? After a dry spell, crops in the Midwest have finally received some rain. Of all maize, 64% is rated as good to excellent. For soy this is 59%. These crops are more susceptible to drought.
Less wheat
Wheat in particular has been hit by drought. It remains extremely dry and hot in the northwestern US. These conditions are also visible in large parts of Canada. Only 16% of American wheat is in good condition. Arable farmers expect to harvest only half a harvest this summer. This is a problem especially for growers of soft white wheat. It is the same type of wheat that we grow in Europe. It is unusual that the wheat harvest in the southern US is being hampered by showers.
Most wheat in the US is durum wheat used for other products. Due to the warm weather, the protein content of this soft wheat is very high. Too high to use for pastries, noodles and crackers. Much of this soft wheat is normally exported to Asia. In the current season (2021-21), the volume even reached a record.
USA in background
The chance that we will notice much of this wheat shortage in Europe is small. The EU and Black Sea region (Russia and Ukraine) are heading for a very good harvest. Australia is also on track to once again achieve a favorable grain harvest at the end of this year. In the last decade, the US has increasingly faded into the background as a wheat exporter. It is mainly Russia that dominates the market. A smaller volume of wheat in the US therefore has less impact on the global market.
Ukraine is one of the countries that expects a top harvest. The latest government figures put the figure at 30 million tons of wheat. That is 5 million tons more than a year earlier. Last season, 44,6 million tons were exported and the government believes that this volume can grow to 56 million thanks to the large harvest this season.
So it is not surprising that prices are under pressure. Ukrainian wheat dropped $11 in price last week with an average price level of $219 to $229 per tonne FOB. Feed wheat is at $215 to $225. In Russia, the price level is now $234 to $238 FOB. The wheat harvest is progressing very slowly. Rain throws a spanner in the works while the combines are busy in the south of Russia. So far, the hectare yields are lower than a year earlier, but this is mainly due to the small volume that has been harvested.