After a very volatile trading session, the wheat market seems to be returning to a small degree of calm. That is different with corn and soy. Due to drought, these crops are declining faster than what the market had anticipated and the parallel with 2012 has been drawn by several analysts. Even then, drought severely affected the final yields.
The September contract for wheat on the Matif closed €0,75 lower yesterday at €246,25 per tonne. Wheat prices were also under pressure on the CBoT, closing 1,2% lower at $7.24¼ per bushel. Corn and soy were on the rise in the last trading session. Corn rose 1% to $6.37¼ per bushel and soy rose 1,8% to $15.21 per bushel.
We have had a very volatile day on the wheat market. In the morning, players were mainly busy processing the failed coup in Russia. The unrest subsided during the day and wheat prices even closed lower than on Friday. A somewhat disappointing US wheat export is cited by several analysts as a reason for the somewhat depressed mood in the market. Weekly exports amounted to 204.000 tonnes, which is at the bottom of the range expected by the trade. Ukraine has exported 26 million tons of grain until June 48,4, the Ukrainian Ministry of Agriculture announced yesterday (Monday, June 26). Of this, 16,6 million tons are wheat, 28,8 million tons are corn and 2,7 million tons are barley.
Drought is also hitting the cornbelt
While the dust is settling a bit in Russia, a new dust storm is almost literally flaring up in the US. It has been dry in the wheat belt on the prairies for a long time and now it is also becoming drier in the corn belt. And that has an effect on the growth of corn and soy in the US, according to the new edition of the Crop Progress report that was released yesterday. 50% of the corn area receives a good or excellent rating and for soy that percentage stands at 51% this week. For comparison: last year this week, 67% of the corn area was rated good or excellent and 65% of the soy area. It was expected that corn and soy would be downgraded, but the USDA has taken a bigger step than analysts and traders expected. The state of corn and soy is now comparable to 2012, when drought occurred after a smooth start and the final yields were low.
Wheat is also in moderate to poor condition in the US, but experts have long expected moderate yields. The latest figures from the USDA did not come as a surprise and did not really move the market. Of the winter wheat area, 40% is given the good or excellent status and 24% of the area has been harvested. Spring wheat has declined slightly from previous levels with 50% rated as good or excellent compared to 51% in the previous edition of the Crop Progress report. Barley is not much better with 46% of the area rated good or excellent, compared to 53% this week last year.
Whether the wheat price will find its way up in the coming days depends largely on what happens to the corn price, according to various experts. Maize and wheat are fairly easily interchangeable, especially for use in animal feed, and if maize prices rise due to lower expected yields, demand for wheat and to a slightly lesser extent barley may well increase, with a similar price effect.