The wheat market continues to struggle. Nerves about disappointing yields in the Black Sea region are subsiding. In the US, the weather is favorable for the wheat harvest and that puts some pressure on the supply of the new harvest. High costs are making US crop farmers question whether they should sow corn or whether soy is a safer option.
The September wheat contract closed €4,25 lower at €254,25 per tonne. On the CBoT, wheat delivered 1,7% lower to $6.46¾ per bushel. Corn also took a step back, closing 0,7% lower at $4.36¼ per bushel. Soybean moved mainly sideways, closing 0,1% lower at $11.77¼ per bushel.
With more than three weeks to go in the 2023/24 grain export season, which runs until June 30, Ukraine has exported 17,6 million tons of wheat. The USDA forecast Ukrainian wheat exports of 17,5 million tons for the season. In total, Ukraine exported 47,4 million tons of grain compared to 45,6 million tons last season over the same period.
Driest May in 30 years
Last May was the driest in thirty years in Ukraine. In some regions it is even the driest May in a hundred years. The fear of drought in Ukraine and also southern Russia on the wheat market is fading, according to analysts. SovEcon also came up with a new yield forecast for wheat in Russia and now estimates it at 80,7 million tons. In the previous forecast from two weeks ago, this was still 82,1 million tons.
The tenders from Egypt and Algeria earlier this week caused some additional weakness on the wheat market yesterday. Compared to the new harvest on the futures market, almost 1,3 million tons of wheat from the old harvest was purchased sharply by the North African countries.
In the US, the weather is helping the wheat harvest on the southern prairies. The weather reports predict dry weather for the next ten days. If the weather forecast comes true, the harvest caravan can move further north at a steady pace.
Growers are struggling with costs
According to analysts, corn is suffering from developments on the wheat market. Wheat prices are pulling corn down with them. A good start to the corn growing season provides an extra boost. According to some sources, US farmers have less confidence in corn this season and appear to consider soy a safer option. Corn is a relatively expensive crop for American arable farmers. Growers who rent land and have to finance seed, fertilizer and crop protection products with borrowed capital are wondering whether they should take the gamble of sowing corn. An additional limiting factor is the relatively high interest rate. Or the fact that you have to pre-finance $700 per acre for corn or $350 per acre for soy makes quite a difference at 7% or 8% interest. According to Reuters, the average cost to Illinois growers for corn is above $4,50 per bushel and $11,50 per bushel for soybeans.
Wet conditions in the cornbelt are another factor that may cause additional soy to be sown at the expense of corn. A large part of the maize was sown on time and under good conditions. However, because there has been regular rain, growers cannot access all the plots where they planned to sow maize. Sowing after June 1 costs yield in maize. Soy can be sown later without sacrificing yield potential.