Analysis Grains & Commodities
Balance on the European wheat market is fragile
Concerns remain about wheat in the EU. After the USDA earlier this week, Strategy Grains yesterday released a new harvest forecast in which the expected yields have been adjusted downwards. The agency even dared to predict that the wheat market will return to a vulnerable situation. In the US, corn responded to weather reports. Warm and dry weather is not what players in the market are looking for. However, drought is not an immediate problem, as the drought monitor shows.
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Choose the subscription that suits youThe September contract for wheat on the Matif closed €1,50 lower yesterday at €238,50 per tonne. Prices closed in the green on the CBoT. Wheat added 0,5% to $6.20 per bushel. Corn closed 0,9% higher at $4.58½ a bushel. Soy rose slightly more than corn and recorded a plus of 1%. The closing price was $11.28½ per bushel.
Strategy Grains has further reduced the yield forecast for wheat in the EU. The agency now estimates the European wheat harvest at 121,8 million tons. That was still 123,5 million tons in the previous forecast from May. The Russian wheat harvest is estimated by Strategy Grains at 78 to 80 million tons compared to 89,9 million tons in the previous estimate. Earlier this week, the USDA estimated the European wheat harvest at 130,5 million tons and the Russian one at 83 million tons.
Precarious balance
Strategy Grains expects the largest drop in wheat yields for France compared to last season. This is followed by Germany, Poland and Hungary. The first wheat has been harvested in the south of Spain and the yields are good. The market agency expects yields to be lower in the north of Spain. Strategy Grains expects that European wheat supplies will be used up in the 2024/25 season. "There appears to be more interest in European wheat than previously expected, partly due to disappointing supply from Russia," the agency writes. Strategy expects that the market will 'return to a rather vulnerable situation'.
Soy got a boost with the news from the USDA that 120.000 tons have been exported to an unknown destination. Some analysts suspect that China is the buyer. Nevertheless, weekly exports were at the lower end of trade expectations. In maize, the weather premium is being cautiously increased. The weather reports mention warmer weather for the American Midwest. The great uncertainty is whether or not there will be rain. The American weather model predicts above-average precipitation, while the European model predicts it will remain dry in the Midwest.
Drought is not an issue now
For the time being, the precipitation deficit is being eliminated in the US, according to the new drought monitor. Only 1% of the soy is in an area that is suffering from drought and 2% of the corn. That was 2% and 3% last week. Last year this week, 57% of the corn and 51% of the soy were affected by drought. Only in wheat is there a major problem with drought in the US. 16% of winter wheat is in a drought area. That was 21% last week, by the way.
