A deluge of yield forecasts set the mood in the grain market to some extent yesterday. In Paris, the grain trade pushed the bottom in the wheat market down while in Chicago market players are cautiously looking up again.
The September wheat contract on the Matif closed €1,50 lower yesterday at €221 per tonne. That is the lowest quotation in 22 months. On the CBoT, the July wheat contract closed cautiously up 0,2% to $6.06¼ per bushel. Corn and soy increased significantly. Corn rose 1,1% to $5.71 a bushel and soy closed 2,6% higher at 13.41¼ a bushel.
The condition of winter wheat in the US remains a concern. In the USDA's Crop Progress report, 40% of winter wheat is rated poor or very poor and 31% is rated good or excellent. Last week that ratio was 41% poor or very poor and 29% good or excellent. Spring wheat sowing continues to lag well behind the five-year average with 64% of the planned area sown compared to 73% in previous years.
Good start for corn and soy
The picture is completely different for corn and soy. Of the planned maize area, 81% is now in the ground, compared to 75% in the five-year average. For soy, the lead over the multi-year average is even greater. This season, 66% of the soy is already in the ground, compared to 52% in the five-year average. Due to a relatively dry spring and above average temperatures, American farmers are making good progress with sowing. Another dry week is forecast this week. The spring work could then be a long way off, various sources report.
There is still sufficient moisture in the soil, but the first sounds are that it will have to rain again in the midwest at the beginning of June if corn and soy are to maintain their lead after the favorable spring. A few doomsayers are already drawing comparisons with 2012, when the spring was also relatively dry, but drought took hold on the crops in June. 2012 was an El Niño year and the first half of the growing season in the US is often drier than average. This is not a widely supported view among analysts.
Above average yields in the EU
The European Commission's scientific institute yesterday published the Mars bulletin with yield expectations for Europe. The JRC has not made any major changes compared to the April edition of the report. The average grain yields have been kept virtually the same at 5,60 per hectare. That is 3% above the five-year average. The average wheat yield in Europe is forecast at 6,01 tonnes per hectare, 1% higher than in April and 4% above the five-year average. The biggest change is in spring barley. The JRC expects a harvest of 3,90 tons per hectare. That is 3% lower than in the April edition of the Mars bulletin and 7% below the five-year average. The lower yields are mainly because barley was sown later than optimal due to wet conditions.
It is remarkable that the wet and late spring is not at the expense of potato and beet yields, according to the JRC. The average potato harvest is 36,4 tons per hectare and for beets the JRC assumes 76,7 tons per hectare. That is 7% and 6% above the five-year average respectively. In general, crop yields in the EU are around or above the multi-year average. The exception is the Iberian Peninsula. Due to drought in Spain and Portugal, expected yields of various crops are 30% to more than 40% lower than the five-year average.
Tough grain deal
The UN yesterday expressed concerns about the implementation of the grain deal. According to the UN, no ships under the deal have been in Pivdennyi port since May 2. Since the extension of the deal, 17 ships have applied to sail to Ukraine. Seven applications have now been approved and are awaiting inspection.
An important condition for Russia to continue with the grain deal is that the Rosselkhozbank regains access to the Swift international payment system. The EU is not interested in this, a spokesperson told Reuters. As a compromise, the UN has proposed that grain payments to Russia be routed through other banks. JP Morgan has already successfully processed the first payment and has been able to make dozens of additional transactions.
Wheat prices in the Black Sea region remain under pressure. According to market agency IKAR, the export price for Russian wheat stands at $242 per ton delivered on the ship on the Black Sea. Last week the agency quoted $248 per tonne for Black Sea wheat. The Kremlin expects to export 55 million tons of grain next season.