Players in the grain market had time last trading session to take a good look at the recent harvest forecasts from Europe and the Black Sea region. A correction was the result. The focus is very much on production, but there are also developments to report in the field of demand. India may reopen its borders to wheat from next month to replenish state stocks. There are some concerns about demand development for corn and soy due to factors outside the agricultural complex.
The September contract for wheat on the Matif closed €1,50 lower yesterday at €263,25 per tonne. Prices also closed in the red on the CBoT. Wheat closed 1,1% lower at $6.92¾ per bushel. Corn gave up 1,6% to close at $4.55¼ a bushel. Soy was also lower, losing 1,3% to $12.14 per bushel.
The wheat market is cooling down. SovEcon yesterday released a yield forecast for wheat in Russia. The agency lowered the expected yield to 85,7 million tons from 82,1 million tons in the previous forecast. The frost at the beginning of May caused more damage than expected. Furthermore, Andrey Sizov, the director of SovEcon, called the current growing conditions challenging in a letter to customers. “In many important winter wheat regions – including Rostov, the largest wheat growing area – it is too dry.”
Rain is forecast for southern Russia. Whether the grains can benefit from this is another matter, according to various experts. The temperatures are also rising and wheat simply does not like very hot weather.
Heat in India but rain on the way
It was really hot in India. In the northwestern state of Rajasthan, the mercury touched 50,5 degrees Celsius. That is just shy of a national record according to the Indian Meteorological Institute. That stands at 51 degrees in the same region in May 2016. The weather service expects the monsoon to start early this year. The agency expects first rains in southern India this week. They will probably continue to the northwest. The temperature will also drop somewhat according to the Indian Meteorological Institute.
It is not just the weather in India that is keeping players in the grains market busy. Several sources report that India is likely to scrap the 40% import duty on wheat in June. India would like to open the door to wheat from Russia and build up the government's stock. For the first time in six years, India would import wheat again.
Good start to growing season in the US
For corn and soy, growing conditions in America dominate the voting. The weather reports are downright favorable for the early development of these crops. The potential is therefore there for good returns. The subdued mood in corn and soy is further reinforced by developments outside the agricultural complex. Oil and energy are under some pressure and that is reflected in the demand for soy oil for biodiesel and corn for ethanol production, according to some experts. American exporters are also suffering from the relatively expensive dollar.