The grain market has taken a step up across the board in the past trading session. This is partly due to the weather forecasts in the United States in particular. The sowing of maize and soya is lagging behind due to cold and wet conditions. Longer term, there are more signs that the tight grain balance is likely to last longer. The CEO of Archer Daniels Midland (ADM) made strong statements about this yesterday (April 26).
On the Matif, the May contract rose to €415,25 per tonne. That is €7 higher than Monday's closing price. The contracts for the new crop were all closed yesterday above €360 per tonne. The September contract stands at €374,50 per tonne and that decreases to €362 per tonne for the May 2023 contract. On the CBoT, the wheat price rose 2% to $1084 per bushel (approximately €375 per tonne). Corn and soy also increased on the CBoT, albeit much more modestly at 0,5% and 0,3% respectively.
The weather in the US is a major cause of the price appreciation. On the southern prairies, drought damages winter wheat. Only 27% of US winter wheat is rated good or excellent by the USDA. That is the lowest percentage for the period since 1989. In the north of the US, the cold and rain are making spring work difficult. In Argentina, the starting conditions for winter wheat look favourable. Cooler weather and rain is expected on the eve of the winter wheat sowing season that begins in the Latin American country in mid-May.
Division in Europe
Crops in Europe are in relatively good shape according to the edition of the JRC Mars bulletin published yesterday. In much of Western, Northern and Central Europe, conditions were good for spring operations and for the growth of crops sown last autumn. The temperature in this area has been on the low side for the past month. Concerns about drought are increasing in southern Europe. In Spain and Portugal, rain has fallen in recent weeks, but that was too late for the winter crops. Drought also has a limited impact on crops in Hungary, Croatia, Romania and southern Ukraine. In parts of Italy and Turkey, growth is lagging due to lower than average temperatures. The JRC expects an average winter wheat yield of 5,74 tons per hectare. That is 2,3% above the five-year average, but 1% lower than in the March edition of the report. This is due to the moderate conditions in Southern Europe.
According to Luan Luciano, the CEO of ADM, we must expect a tight global grain balance in the coming years. The CEO wrote this in the explanation of the quarterly figures that the company presented yesterday. He cites a disappointing harvest of rapeseed in Canada, low crop yields in South America and the disruption of logistics chains due to the war in Ukraine as the reasons. The demand for grain will in any case exceed production until 2024. This means that stocks are being used and that prices remain at a structurally high level. These relatively high prices have encouraged farmers in South America to expand their acreage.