Despite the absence of really extreme weather on the European continent, yield and quality expectations are being adjusted further downwards. The foundation under the grain market will thus become even stronger.
In the United States and Canada, arable farmers have had to deal with an extreme year. It was dry long before spring wheat was sown. It remained that way throughout the growing season. Now that the combines have also started harvesting there, it is becoming increasingly clear that things will be very disappointing.
Spring wheat is disappointing
Much durum wheat is grown in the affected Northern Plains and Canadian Prairies. A type of durum wheat that is used, among other things, for pasta. No competitor for our European soft wheat, but it does provide mood. The first yield figures from the US and Canada are slightly more positive than previously thought. This is mainly due to the fact that the really bad plots are no longer harvestable. Many plots have been mown for hay or chopped for animal feed.
Canada is the largest producer of spring wheat. Due to the small harvest, the Ministry of Agriculture expects that exports will decrease by more than 10%. The USDA, meanwhile, expects US spring wheat exports to reach their lowest point in 33 years this season. This concerns 8,3 million tons.
Russia also harvests less
In Russia it is also assumed that the yield of spring wheat will be disappointing. Central Russia and the Volga region have also been dry this season. The grains there are later, so there is no clear picture of the yield yet. Leading market agencies have already lowered their yield forecasts for the country as a precaution. For example, last week SovEcon came up with a forecast that is 2,3 million tons below the previous one.
The winter wheat harvest is continuing to progress in the country. According to government figures, 20,8 million hectares have now been harvested, of which 14,7 million hectares are wheat. The yield is an average of 3,16 tons per hectare. A year earlier that was 3,66 tons per hectare. A lot of rain has fallen locally, causing quality problems. On average, the grain harvest is going smoothly. There is talk of a 7,8% smaller grain harvest this year. The total volume is still 17% higher than the 5-year average, says consultancy firm ProZerno. A larger area of wheat partly compensates for the lower yield.
The export scene is changing
Because the major wheat producers worldwide are harvesting and exporting less, the scene is changing. The smaller volume from the US and Canada is mainly absorbed by Australia, due to their favorable position compared to the Asian market. Australian wheat export expectations have therefore increased by 13% compared to a year earlier.
Due to tight availability, prices remain relatively high. The Canadian Department of Agriculture estimates an average of $285 Canadian dollars per tonne for wheat. That's $15 more than a year earlier. In the US, the price of wheat in Chicago is at its highest level in 9 years. Prices are also rising in Russia. Last week, $267 per ton was paid for winter wheat. An increase of $13 from the previous week.
Russian buyers have taken few long-term positions this season, which means they sometimes have to act quickly. That drives the price up. The relatively high prices for grain corn also help to strengthen the foundation of the wheat market. At the current price level, it is more favorable to purchase wheat for animal feed than corn. What plays a role in the EU is that more feed wheat is available than milling wheat due to disappointing quality due to persistent rainfall.