The grain market is like a weather vane. Soy increased further at the beginning of this week due to drought and disappointing yields in Brazil. Now that rain is expected, the weather premium will just as easily be reduced again. The wheat market, on the other hand, held up. The IGC also issued new forecasts, exposing the fundamental tightness on the grain market.
The March wheat contract on the Matif closed yesterday €0,75 higher at €218,25 per tonne. On the CBoT, wheat closed 0,2% in the green at $6.12¼ per bushel. Corn moved mostly sideways, closing 0,1% lower to $4.51¾ per bushel. Soy took a hit yesterday, trading 1,4% lower at $12.23 per bushel.
There is little news on the wheat market that is causing a stir. The plane crash in Russia earlier this week caused unrest, especially in the US, but that has now subsided. SovEcon increased its wheat harvest forecast in Russia by 0,9 million tons to 92,2 million tons. Because there was sufficient snow, the frost in January hardly had any grip on the winter crops. According to the market agency, the starting position for winter wheat for the coming harvest is favorable.
In the US, the starting position for winter wheat is a lot better than the last two seasons. There is hardly any drought on the prairies, like last year. Just like in Russia, frost damage on the southern prairies is not as bad due to sufficient protection from a thick blanket of snow. A beneficial side effect is that the moisture supply in the soil is also replenished by melting snow. The winter that has so far gone without major problems in these two major wheat-producing countries has had only a limited price-pressure effect on the market.
Soya can still improve
That is different with the weather reports for South America. Precipitation is expected in both Brazil and Argentina. This is less favorable for the harvest going on there, but the late-sown soy in Brazil in particular can still benefit greatly from this rain. The export figures from the Buenos Aires grain exchange were somewhat below expectations, according to analysts. To top it all off, the International Grains Council (IGC) issued a bearish forecast for soy. The IGC increased world soy production for the 2023/24 season by 6% compared to last season to 392 million tons. The higher production is mainly due to a better harvest in Argentina.
For wheat, the IGC expects a decrease in the area of 1% compared to the previous growing season. This is partly due to lower prices and unfavorable conditions for sowing last autumn in various countries. Total grain production is estimated at 2.307 million tons in the 2024/25 season. That is 2% more than last season. The larger harvest is mainly due to good yields in corn. Grain consumption is estimated at 2.314 million tons. That would be the seventh year in a row that closing inventory has been reduced.