The weather is leading on the grain market

The March wheat contract on the Matif showed a minimal increase of €0,25 yesterday to close at €297,75 per tonne. Grain prices fell slightly on the CBoT. Wheat closed 0,7% lower at $7.48½ per bushel. Corn lost 0,9% and soy was the biggest decliner with 1,3% to close at $14.60¾ per bushel.

Concerns about economic development have been weighing on the grain market for days now. The impending recession is also not passing by unnoticed on the agricultural markets. However, the focus of various analysts is shifting to growing conditions and therefore the expected yields of the crops. Soya perhaps stands out the most in that regard. Last Friday and Saturday, significant precipitation fell in about half of the growing regions where soy and corn are grown, according to Commodity Weather Group. Farmers in Argentina are dealing with a historic drought, which means that part of the planned soy area has not (yet) been sown and what is in the ground is having difficulty getting started. The rain of the past few days was more than welcome and provides a boost to growing crops. But the problems with drought have certainly not been solved now that precipitation has fallen, several analysts warn. The weather will really have to change if we want to break the trend and significantly increase the yield potential of soy and corn.

Overheated market
In the US, sluggish exports continue to cause headaches. The somewhat improved starting position of corn and soy in Argentina did not help the mood. The lower prices of wheat from the Black Sea region also contributed. In that respect, it is striking that the Indian government is putting 2 to 3 million wheat from the intervention stock on the market in an attempt to cool the overheated (domestic) wheat market. India's wheat reserves have already shrunk to their lowest level in six years. By placing the intervention stock on the market, the Indian government appears to be to some extent taking an advance on an expected large harvest expected for the country, including through a significant expansion of the acreage.

Winter
There is great uncertainty among analysts about a good winter wheat harvest in the US. A cold front in large parts of the northern Prairies put a floor in the market last trading session. Drought already caused a bad start for winter wheat. This is now being hit by strong cold, increasing concerns about the wintering out of the wheat. This ensures that the wheat quotation did not drop much further.

In Europe, the cold of recent days actually improved the winter hardiness of the wheat. At least that is what the JRC Institute of the European Commission writes in the December edition of the Mars Bulletin. The autumn was mild and the wheat was therefore hardly hardened off. A winter pinprick at the end of November caused minimal damage in parts of Germany and Poland, according to the JRC. Cold weather in the first half of December has ensured that a large part of the winter wheat in Europe has built up cold tolerance. The sharp drop in temperatures that started in mid-December may still cause wintering problems in Central and Eastern Europe, the JRC warns.

View the overview of grain prices and the technical analysis here.