The grain market is taking a pause during the past trading session. Rain in parts of the US wheat belt, however, brought some relief. But the concerns about disappointing growing conditions in various growing regions are far from gone.
The May wheat contract on the Matif gained €2 yesterday (Monday 2,25 May) to close at €403 per tonne. The contracts for the new harvest took a small step back. The September contract closed €2,50 at €377,50 per tonne and the May 2023 contract closed at €364,75 per tonne. That is €3,25 lower than last Friday's closing price. On the CBoT, the May and July wheat contracts closed marginally lower and the September contract price remained unchanged. Corn closed 0,6% lower on the American stock exchange. The soy price was the most volatile and fell by 2%.
According to experts, the decline in soy is closely related to the progress of the spring work in the US. Only 14% of the planned corn area has been planted, according to the U.S. Department of Agriculture (USDA) Crop Progress report. The five-year average for this period is 33%. The ideal sowing date for corn is before May 10. That date is fast approaching and it will be difficult for growers to sow on time. Soy can be sown later without sacrificing yield potential. Moreover, the (artificial) fertilizer requirement for soy is lower than corn. Several experts therefore expect American farmers to drop part of their corn acreage and opt for soy instead.
Wheat market dominates again
The condition of winter wheat remains a concern on the grain market. Wheat is generally in good shape in Europe, as was confirmed last week by the European Commission's JRC Mars bulletin. Overall, wheat in the US is in less good shape. The USDA gives 43% of the winter wheat acreage the status of poor or very poor. Last season that percentage was 19%. Rain has brought some relief to some parts of the US in recent days, but - as one source put it - it's too little too late for winter wheat to really benefit. The season is not going according to the book in India either. In the north of the country, farmers are struggling with extreme heat. After five years in a row with record harvests, the grain harvest will most likely be lower this year.
To determine the price of the new harvest, market players look at the harvest and consumption expectations of renowned government institutions and market agencies. The USDA's Wasde report is perhaps the most authoritative of these. According to some analysts, recent editions have clearly attempted to downplay the consequences of the war in Ukraine on the world grain market. The USDA partly has a point and the role of Ukraine should not be overestimated. Underestimation is the other extreme and, according to some analysts, this is lurking in an attempt to keep the market under control. There is a lot of uncertainty among traders and speculators. This ranges from problems with the export of grain from the Black Sea region, to disappointing yields and countries taking protectionist measures. According to some experts, these uncertainties are not sufficiently reflected in the forecasts of, for example, the USDA.