Wheat is the market where it happens, it seems. Reports of frost in Russia had previously caused unrest, and yield estimates from Ikar and SovEcon topped that yesterday. Both market agencies have sharply reduced forecasts for the Russian wheat harvest. The USDA released the new Crop Progress report yesterday. That's fairly neutral for wheat, but some analysts are a bit concerned about progress in sowing corn.
The September wheat contract on the Matif closed €9,25 higher yesterday at €258,75 per tonne. Wheat was also on the rise at the CBoT. The July contract on the Chicago exchange closed 3,5% higher at $6.87 per bushel. Corn also inched higher, gaining 0,6% to $4.72½ per bushel. Soybean moved more sideways, closing half a cent higher at $12.19½ a bushel.
Frost relatively late in the season already caused some unrest on the wheat market last week. Ikar's new yield forecast exceeded that yesterday. Ikar expects that next harvest 86 million tons of wheat will be harvested in Russia compared to 91 million tons in the previous forecast. By comparison, the USDA projected a wheat harvest of 91,5 million tons last Friday in last Friday's Wasde report. Ikar lowered its wheat export forecast by 3,5 million tons to 47 million tons. The USDA actually increased its export forecast by 1,5 million to 51,5 million tons last week. Ikar's Russian wheat price is expected to reach $221 per tonne this week. That's $5 higher than last week.
SovEcon also lowered its wheat yield forecast in Russia by 3,4 million tonnes to 89,6 million tonnes. In the south of Russia, only 20% to 40% of the average rainfall has fallen in recent months. Approximately 40% of all Russian wheat is grown in this region. "The problems are exacerbated by unexpected late night frosts that further put pressure on yields in the central and southern regions," writes SovEcon. "The crop was extra sensitive to frost damage because it was weakened by the drought. The extent of the damage has yet to be determined, but a further reduction in yield expectations cannot be ruled out."
Smallest wheat stocks since 2008
Other bullish news for wheat came from India. Indian wheat stocks fell to their lowest level in sixteen years as of May 1. On May 1, there were 26 million wheat in government stores in India. That was 29 million tons last year and the smallest wheat stock since 2008, according to the government Food Corporation. Wheat yields in India have been disappointing over the past two years. In addition, the Indian government has released a record amount of wheat from the intervention stock onto the market. This was done to ensure sufficient supply on the domestic market and to keep prices under control.
The USDA's weekly Crop Progress report last night ET was fairly neutral on wheat. 50% of the winter wheat area will be given the good or excellent status. That's the same as last week. The winter wheat is quite advanced in growth. 57% are in the ear compared to 44% in the five-year average. Good progress is being made in sowing spring wheat in the US. Of the planned area, 61% is in the ground compared to 48% in the five-year average.
Time is running out for corn
Despite showers last week, American corn growers have not been idle. Almost half, namely 49%, of the planned maize area has been sown. Last week 36% was sown and the five-year average for this week is 54%. Time is running out for sowing corn, some analysts warn. The optimal time window for sowing corn is the first half of May. The growth of the corn already sown is slightly ahead of the multi-year average according to the USDA. 23% are above compared to 21% in the five-year average.
Soy sowing is reasonably in line with the five-year average. Up to and including May 12, 35% has been sown against 34% in the five-year average. Last year this week, 45% had already been sown. Of the soy sown, 16% is at the top compared to 10% in the five-year average.