In the run-up to the publication of the Wasde report, which will be published tonight Dutch time, the corn and soy prices are on the rise. The wheat market, on the other hand, is struggling to choose direction and is moving mostly sideways. The FAO warned yesterday that tension in the grain market will continue for a while.
For a change, there has been little spectacle in the wheat market over the past trading session. On the Matif, a small correction was made upwards at €5,50 to close at €385,25 per tonne. On the CBoT, the wheat quote actually took a small step back to $10.71,25 per bushel. Traders and speculators are cautious about taking positions ahead of the Wasde report. In addition, according to various analysts, it is also a factor that the grain harvest in the south of the US and the EU is not far away. Traders seem to be keeping a low profile until the first reports about the actual returns become known. The Rosario grain exchange in Argentina yesterday lowered its wheat yield forecast by 500.000 tons to 18,5 million tons due to drought caused by La Niña. That news hardly provoked a reaction on the grain exchanges.
We are still early in the growing season for maize and soya. Maize went into the ground relatively late and that often has a negative effect on the yield. Warm and dry weather is forecast in the US Midwest for the coming weeks. Add to that the buoyant exports of these commodities and you have a recipe for rising prices as we are now seeing on the CBoT.
Control
The relatively high grain prices are worrying governments around the world. To a greater or lesser extent, governments are trying to keep prices somewhat under control. Analysts are excited to see where the US government is trying to steer the market with the industry-leading Wasde report. The weekly Crop Progress report sent out a clear bearish signal. This has not been picked up by the market given the rally of soy and maize in recent days. The big question on trading today is what signal is the USDA sending out with the Wasde report, and how will traders deal with it if that signal doesn't match expectations built up this week?
The UN Food and Agriculture Organization (FAO) warned in a report yesterday that tension in the grain market could continue beyond the 2022/2023 season. The reason for this is the sharp rise in production costs in agriculture. Fertilizer prices, among other things, have risen extremely. The index for the input costs for the farmer has risen faster than the yield prices in the agricultural sector. Effectively, that means lower margins for farmers, according to the FAO. This makes it more interesting for farmers from a business economics point of view to be sharp on the cost price and to focus less on maximum production. Developing countries are finding it difficult to import sufficient food due to high grain prices. The FAO calls these 'alarming signs from a food security perspective'.