Drought is lurking in parts of southern Europe in the coming season. The JRC warns about this in the latest edition of the Mars bulletin. Players on the futures market in Paris don't seem to be too concerned about this yet, although contracts for the new crop remain at a fairly high level from a historical perspective.
The March contract for wheat on the Matif lost slightly yesterday by €0,50 compared to Friday's close, closing at €294,50 per tonne. The May contract is currently the most traded contract at €291,25 per tonne. The March and May contracts are relatively close to each other. For the 2023 harvest, the September contract on the Matif closed at €283,50 per tonne and this increases to €285,50 for the May 2024 contract. These are striking small differences in the contracts for the new harvest on the Matif. By comparison, on the CBoT, the September 2023 contract closed at $7.89¾ per bushel, rising to $8.11¼ per bushel. That is a difference of almost 3% between delivery behind the combine on the American exchange versus a difference that remains below 1% in Paris. Yesterday, trading on the CBoT was halted due to Presidents Day.
The winter grains in Europe are generally in reasonable to good condition. This is evident from the February edition of the Mars bulletin from the JRC institute of the European Commission. January was exceptionally mild in almost all of Europe, meaning that little or no wheat was overwintered. The JRC does not expect any cold period until February 25, which means that the risk of frost damage to winter grains remains small.
Drought in Southern Europe
The JRC does warn of drought. The south of Portugal and Spain and the north of Italy have a major rainfall deficit. About 15 millimeters of rain has fallen on the south of the Iberian Peninsula since January 50. That is less than 20% than the average rainfall for this period in the area. After a dry period in the previous growing season, the basins and groundwater reserves are now insufficiently replenished to be able to irrigate the crops next spring and summer. There is also a precipitation shortage in the east of France and the south of Germany, but this is less of a concern for the JRC for the time being. This also applies to parts of Ukraine, southern Russia and Turkey. The crops now require little water, which keeps them growing. The advantage of the relatively mild and dry spring is that the sowing of spring wheat and spring barley is progressing faster than average, according to market agency FranceAgriMer.
Russian grain exporters slowed down last week, according to export figures. According to market agency IKAR, Russia exported 730.000 tons of grain last week compared to 540.000 tons a week earlier. However, the wheat price hardly responded to the increased exports. For delivery to the Black Sea ports, the price for Russian wheat increased by $1 to $299 per tonne according to IKAR. In Brazil, the soy harvest is progressing steadily. According to AgRural, a quarter of the acreage has been harvested by Thursday, February 16. The harvest is getting off to a good start, especially in the important soy growing region of Mato Grosso.