The wheat market is very sensitive to weather reports. Reports of drought in key growing areas boosted the wheat market last week. This week there is rain or showers in the forecast and a downward correction could just as easily occur. You would almost think that only farmers are active in the wheat trade. Corn and the US received a small boost from Biden's plans to include ethanol among sustainable aviation fuels.
The May wheat contract on the Matif closed €3,25 lower yesterday at €205 per tonne. On the CBoT, wheat lost 0,6% to $5.81½ per tonne. Corn and soy were on the rise last trading session. Corn was 0,9% higher at $4.43¼ per bushel. Soy also rose by 0,9%. That brought the closing price to $11.55¾ per bushel.
Players in the wheat market are very sensitive to weather reports. Showers are forecast for southern Russia later this week. Showers almost by definition have a local character and it is now predicted that precipitation will not fall everywhere in the south of Russia. In the eastern part of the U.S. wheat belt, farmers had better luck. There was extensive rain there last day. Eastern Kansas and Oklahoma and northern Texas were missed by the rain front. Still, it was enough to dampen the mood on the wheat market.
Good and bad sides
In the cornbelt, last day's rain is both a curse and a blessing. It was dry, so in that sense the rain is more than welcome. On the other hand, sowing of corn and soy will be halted for a few days. It first sags and then blows up before the seeders can get back onto the land.
A boost for the US corn sector is the Biden administration's long-awaited decision on green aviation fuel. The US Treasury Department released new tax and subsidy plans on this subject. The industry has lobbied for months to include ethanol from corn under the scheme. This has paid off, because in the plans maize would be eligible for the scheme. In the Ministry of Finance's guideline, aviation fuel is sustainable if it releases 50% less greenhouse gases over its entire life cycle compared to traditional petroleum-based fuels.
Wheat market in Ukraine is picking up
Ukraine exported 1,9 million tons of wheat in April. According to some sources, the export price reached the highest level in eleven months. More importantly, Ukraine's wheat supply is shrinking considerably. According to some analysts, wheat exports could slow down in the coming months until the new crop becomes available.
Yesterday the USDA released a forecast for the upcoming wheat harvest in Australia. At 25,8 million tons, the 2024/25 harvest would be comparable to last season. Production is therefore 3% below the ten-year average. The USDA expects Australian wheat exports to drop by 2,5 million tonnes to 17,5 million tonnes next season. According to the USDA, this decrease is because supplies are being cut in the current season.