It is either too wet or too dry, a happy medium is temporarily not possible. Drought is on the rise in the US. Not in the wheat belt like last year, but in the Midwest, the corn region par excellence. The only advantage is that it can be sown early. In South America it is a surplus of precipitation that causes problems. Europe today presented the proposal to limit the import of grain from Russia. A strong example of symbolic politics or even a diversionary maneuver according to critics.
The May wheat contract on the Matif closed €0,75 higher at €199,75 per tonne. On the CBoT, the wheat contract closed 0,3% higher at $5.46¾ per bushel. Corn also showed an increase of 0,4% to $4.40¾ per bushel. Soy also remained in the green down 0,2% to $12.12 per bushel.
The weather was an important factor on the grain market last trading session. According to some, it is becoming too hot and too dry for grain crops in eastern Ukraine and Russia. However, SovEcon came up with a new harvest forecast for Russia and has increased the wheat yield by 1,2 million tons to 94 million tons. In the latest Wasde report, the USDA still calculated 91,5 million tons of wheat for Russia.
Dry and early start
In the US, a lack of precipitation is also a topic of conversation. On the prairies the starting position for wheat is a lot better than last season. Last day there was rain in Oklahoma and Texas and the forecast calls for more precipitation. What the rain is missing so far is the Midwest. The largest corn producing state of Iowa has had a particularly dry start to the season. This does not necessarily have to be negative for revenues. Growers can sow early and last year it turned out that despite a dry growing season, yields were good or excellent. This season the cards are shuffled differently. Moisture reserves were insufficiently replenished last winter and in several parts of Iowa there are restrictions on the use of water or streams and rivers have simply dried up.
In South America, it is not drought but rain that is a problem. The severe weather that hit parts of Argentina and southern Brazil earlier this week is over. All in all, two to four times as much rain has fallen as the average over the last thirty days and the crops have not recovered from this. The Buenos Aires grain exchange lowered its corn yield forecast by 2,5 million tons to 54 million tons. That is still an above-average harvest. The five-year average for the corn harvest in Argentina is 50,2 million tons. For soy, Buenos Aires keeps the yield expectation the same at 52,5 million tons.
Europe does not dare to take the bull by the horns
The European Commission today published a proposal to impose an import tax on wheat from Russia and Belarus. The rate is €95 per tonne for grains and a 50% levy on oilseeds and derivatives such as scrap. Until now, sanctions on the import of grains from Russia were out of the question to prevent the world food supply from being disrupted. Europe is now introducing tariffs to prevent disruptions to the internal market. The Commission's proposal still has to be approved by the Council and the European Parliament.
Various sources mention the symbolic politics that Europe practices. Russia and Belarus are both small players on the European market, especially if you compare it to what has come out of Ukraine in the last two years. Imports from Ukraine are the major problem that the farmers' protests are partly aimed at. Ukrainian growers do not have to comply with the same laws and regulations as their European colleagues, but in a Commission proposal last Wednesday they will be given virtually unhindered access to the European market for an extra year. That proposal caused resentment among France and Poland, among others.