The price increase on the grain market does not seem to have come to an end for the time being, with Russia and Ukraine largely determining the mood. Weather continues to be a factor in the corn and soybean market.
The September contract for wheat on the Matif closed yesterday €3,75 higher at €238,25 per tonne. On the CBoT, the July wheat contract was on the rise, closing at $6,35 per bushel. The September contract also closed higher in Chicago. Reuters reports that 98% of American spring wheat has now been sown. 60% of the spring wheat is in good/excellent condition, although this is 4 percentage points less than a week ago.
In Europe, it is Russia and Ukraine that are leading the charge. UN Secretary General Antonio Guterres says he fears for the future of the Black Sea deal. There are also signals that Russia is imposing an unofficial minimum price for its export wheat. Last week it was announced that Egypt has purchased 55.000 tons of Russian wheat for $229 per ton Free on Board (FOB). But the selling party has now withdrawn the offer. All other wheat from Russia was offered at $240 per ton FOB. "The impression is that the Russian authorities have not granted an exemption for selling at a low price to Egypt, it seems that the price of $240 is being imposed," a grain trader told Reuters. Tunisia canceled a tender on Monday. A new tender is expected to be issued this week. Finally, FranceAgriMer has lowered the wheat rating by 3 percentage points to 88% good to excellent, but that is better than last year when only 66% of wheat received that rating.
While Russia wants to raise the wheat price, India seems to want to lower it. The country has imposed a limit on the amount of wheat traders can have in storage to drive down prices. It will also provide 1,5 million tons of wheat to consumers such as millers to bring down food prices, which rose 8% last month.
Australia exported more than 3 million tonnes of wheat in April for the fourth month in a row. The most important final destination was China, followed by Thailand and Indonesia. So far, 19,5 million tonnes have been exported in the period October to April, 25% more than the same period last year. Thanks to good rainfall in the grain belt of Western Australia, the production potential of this season's grain harvest has gone from below average to at least average or even above average.
Grain theft
The G7 countries are working on a way to stop the possible theft of Ukrainian grains by Russian parties. They want to do this by tracing the origin of the grain using chemical identification. British Minister of Food and Agriculture Mark Spencer announced at the International Grains Council that Great Britain is taking the lead on the plan.
Ukraine has expressed its dissatisfaction with the subsidy Poland gives to its farmers to compensate for the sharp increase in grain exports from Ukraine. The Polish government has approved a 10 billion zloty ($2,2 billion) subsidy to help farmers compete with the glut of Ukrainian grains that have flooded into the country.
Worries about frost in Brazil
The July corn contract closed at $6,17 a bushel, hitting its highest in just under a month on Monday. The September contract also closed higher at $5,44 per bushel. The corn price is on an upward movement due to bad weather conditions in the US. Moreover, it increasingly appears that the market has accepted serious production losses, even if rain will fall soon. The rain that fell last weekend was not enough and did not have the hoped-for effect.
In most US states, corn's status declined over the past week. Improvement was only reported in Colorado, Missouri and Texas. On average, 61% of the wheat is good to excellent. That is less than analysts had estimated and 3 percentage points less than a week ago.
In Brazil, 2,2% of the second corn crop in the central-south of the country had been harvested last Thursday, agribusiness consultant AgRural reported on Monday. That is an increase of 0,8 percentage points compared to a week ago. Last year on that day, 6,6% of Brazil's corn had been harvested.
For the time being, fieldwork is limited to the state of Mato Grosso. Overall, the corn fields appear to be developing well, but weather conditions must remain good until at least the end of June for the crop to reach its full potential. According to AgRural, farmers in the states of Parana and Mato Grosso do Sul are concerned about lower temperatures in the second half of June that could bring frost and damage to crops. Brazil is expected to produce a total of 127,4 million tons of corn this season. The second corn crop, also known as safrinha, accounts for the majority of Brazil's corn production at 97,9 million tons.
Hoping for rain
The July soybean contract closed lower Monday at $1,37 per bushel. And the August contract also lost value, closing at 1,29 per bushel. This reduces the value of the old stock of soybeans. The contract price for November actually rose, partly due to concerns about the drought in the US.
At 140.000 tons, American exports were below the expected 175.000 to 400.000 tons. 96% of American soybeans have now been sown. As with wheat and corn, the condition of the crop also declined with soybeans. On Sunday, 59% of soybeans were rated good to excellent, which is 3 percentage points less than a week ago and 11 percentage points less than a year ago. 59% is also the worst rating for this specific week since 2008.
The crop is not in good shape especially in Michigan, where only 30% of all soy is in good to excellent condition. All in all, there are only four states where soy has not declined. The weather largely determines the state of affairs on the soy market. Drought and disappointing rain this weekend are putting pressure on crops in the US Midwest. Although rain is forecast, American farmers seem to have 'seeing is believing' as their new motto. At least that is the mood in the market according to Matt Ammerman, commodity manager at StoneX, citing Reuters.