The Black Sea region in the US growing conditions attract the attention of traders and analysts in the wheat market. In the US, both growers and traders are preparing for the new crop of corn, although it is currently difficult to make valid statements about this. Furthermore, Opec+ provided a surprise that did not go unnoticed by the agricultural markets.
The grain market showed a mixed picture during the last trading session. On the Matif, the May contract yielded €4 and closed at €256,25 per tonne. On the CBoT, wheat closed narrowly in the green with a plus of 0,2% at $6.93½ per bushel. Corn closed 0,4% lower on the US exchange at $6.57¾ per bushel. The biggest spectacle was with soy. The oilseed price closed 1,1% higher at $15.22 per bushel.
The weather in the US and developments in the Black Sea region are the trendsetters on the wheat market. Yesterday it was announced that after Viterra and Cargill, Louis Dreyfus is also withdrawing from the Russian market. And as we have come to expect, the Russian ministry announced almost immediately after Dreyfus' message that the decision has no consequences for Russian grain exports. Somewhat in the shadow of the news from Russia, export possibilities for Ukraine are also being tinkered with. Due to the war, not all of the Ukrainian ports on the Black Sea are operational, even under the grain deal. A significant part of the grain (mainly corn and wheat) from Ukraine is therefore exported via alternative routes via the EU. The intention is that this grain will still reach the world market via the Baltic Sea, for example. In practice, however, some remain in the eastern EU member states. This grain, which does not always meet European quality standards, is also offered on the European market at relatively low prices. There has been dissatisfaction about this for some time in various eastern member states. Five of these Member States reportedly approached the European Commission yesterday asking for measures to be taken against what they consider unfair competition from Ukraine. Polish Agriculture Commissioner Wojciechowski has not shown himself to be insensitive to these complaints and the rumor mill about possible trade restrictions is running at full speed.
The condition of wheat in the US is worrying
The USDA released the first weekly Crop Progress Report of the season yesterday. According to various analysts, wheat is the problem child. In the eighteen largest wheat states, wheat is in less good shape than at this time last season. In Kansas - one of the most important wheat products in the US - only 16% of the acreage receives good or excellent status from the USDA. 31% of wheat is even in very poor condition. In the states of Idaho, Montana and South Dakota, there is no wheat with excellent status at all, according to the USDA. It should be noted that these are states where a relatively large amount of spring wheat is grown. Winter wheat is coming into the ear in several southern states. Especially in California, wheat is far ahead in development. 30% of the state's winter wheat is on the ear versus 17% this time last year and 4% in the five-year average.
Corn sowing has yet to really begin in the US. In several states, several percent of the planned area is in the ground, which is in line with the five-year average. Only in Texas has real progress been made. There, 57% of the planned maize area has been sown, compared to 54% in the five-year average.
Boost from Opec
Soya received unexpected support from Opec+ yesterday. The oil cartel announced yesterday that it would cut oil production by 1,5 million barrels per day. As a result, Brent oil rose by almost 6% yesterday to $85 per barrel. According to several analysts, the higher oil price had an impact on the soy price. Soy oil can be mixed into diesel. What is not entirely consistent with this reading is that corn did not show a similar price movement. As a raw material for ethanol, corn is also an important oil substitute in gasoline. It is possible that the USDA's acreage expectations from last Friday will still have an impact on the market. This predicts a significant growth of 4% in the American corn area.
Argentina, which is facing a downright poor soy harvest due to extreme drought, nevertheless wants to stimulate exports. The government of the South American country yesterday presented a 'soy dollar' program. For the third time in less than a year, the country offers soy exporters a favorable (above the normal) exchange rate for the US dollar. The Argentine government wants to promote the inflow of hard dollars in an attempt to revive the ailing public finances.