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Inside Grains & Commodities

Is the grain yield estimated too high?

16 July 2021 - Jurphaas Lugtenburg

The drought in large parts of North America seemed to have no effect on the wheat market for a long time, mainly due to good yield expectations elsewhere. Now that the grain harvest has started, the market is getting a bit nervous and the quotations are rising.

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The USDA WASDE report released last Monday (July 12) shows no dramatic shifts and still predicts a record wheat harvest. The market doubts whether these good harvests will actually be achieved.

It is not only dry in the US. The southern grain regions in Russia are also suffering from heat and drought. The Russian market agency IKAR yesterday (Thursday, July 15) lowered the total harvest forecast for Russian wheat to 81,5 million tons. That is 2 million tons lower than the previous forecast. The July WASDE report provides a small warning about fair to poor spring wheat in North America.

Stock markets react quite violently
The stock markets react quite strongly to the news; stronger than you would expect with a record harvest still in prospect. The most extreme example is the September spring wheat futures contract on the Minneapolis Grain Exchange (MGEX), which rose to $15 per bushel yesterday (Thursday, July 9). That is the highest rating in more than 255 years. The European Matif listing reacted less strongly, but the price did rise from €8 per tonne on Monday, July 199 to €12.

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