The grain market is viewed in very different ways from America and Europe. In the US, so to speak, every drop of rain that does or does not fall (and what does with the potential yields) is analyzed. In the EU, analysts are much more focused on developments in Russia and Ukraine and yield expectations hardly play a role, you might think.
The September contract for wheat on the Matif gave up €4,50 yesterday to close at €226,25 per tonne. Also on the CBoT, the September wheat contract took a step back, closing 1,4% lower at $6.41¾ per bushel. With corn there were pluses and minuses. The July contract rose 0,5% to $5.57¼ per bushel, while the September contract was down 0,1% to $4.88 per bushel. Soy continues its uptrend, closing last trading session at $15.62 per bushel. Today (Tuesday, July 4) the CBoT is closed due to American Independence Day.
The rain that fell in parts of the US last weekend is dampening sentiments on international grain markets. Corn and soy in particular can benefit from this. Yet this is not yet reflected in the new edition of the USDA's Crop Progress report, which was released last evening Dutch time. 51% of the corn area receives a good or excellent rating compared to 50% last week. Soy actually dropped from 51% good or excellent last week to 50% this week.
Drought does not hasten harvest
The winter wheat harvest is lagging behind the multi-year average. 37% of the area has been harvested compared to 46% in the five-year average. The condition of winter wheat has remained virtually unchanged with 40% of the area in good or excellent condition. Spring wheat has deteriorated somewhat. Of the spring wheat area, 48% is given the good or excellent status, compared to 50% last week. That doesn't come as a complete surprise. The rain has missed the northern prairies - where most spring wheat is grown. The rating of barley has increased with 51% of the area receiving a good or excellent rating versus 46% last week.
rapprochement
The European grain trade is less focused on weather conditions, although it is very dry in parts around the Mediterranean. Analysts are more concerned with the supply of grain from Russia and Ukraine. The EU has opened the door slightly to allow the Russian agricultural bank Rosselkhozbank to be reconnected (to a limited extent) to the Swift international payment system. Access to the payment system is an important requirement for Russia to agree to an extension of the grain deal after July 18. The Kremlin has not exactly responded enthusiastically to the opening offered by the EU and a spokesperson told Reuters yesterday that he has 'little hope' of continuing the deal.
A senior official of the Ukrainian Ministry of Foreign Affairs has privately spoken out strongly against the possible granting of a subsidiary of the Rosselkhozbank to the Swift system. "On the one hand, the opportunities for agricultural exports are good. On the other hand, making concessions to the extortionist is encouraging him to continue blackmailing. This is a well-known phenomenon: the extortionist does not stop if you meet his demands. He simply comes up with new apologies for blackmail,” writes Olga Trofimtseva, according to the Ukrainian market agency APK Inform. This is not the official position of the Ukrainian government, Trofimtseva emphasizes.
The yield of wheat in Russia is relatively high at the start of the season, according to market agency Sovecon. The average hectare yield so far is 3,3 tons per hectare, which is 26% higher compared to last season. Sovecon does note that the figures are somewhat distorted by high yields in the Krasnodar region (in the south near the Black Sea) with approximately 6 million tons per hectare. In several other regions, yields are lower than last season.