The smooth progress of the wheat harvest in the US and the good condition of winter wheat there continues to weigh on the wheat market. Little attention is paid to Europe. That could change when the combines for winter wheat start driving in France. Romania is on track for a large wheat harvest, but a profit warning is being issued due to the warm and dry weather forecast there. It is also hot and dry in China. Not a good start for the corn there. The Chinese government has already announced a package of measures to control the situation.
The September contract for wheat on the Matif closed €1,25 lower yesterday at €229 per tonne. Wheat was also down on the CBoT, losing 1,6% to close at $5.82 per bushel. Corn and soy were on the rise last trading session. Corn added 1,4% to $4.50 per bushel. Soy also closed 1,4% higher, bringing the closing price to $11.74 per bushel.
The US in particular is attracting attention on the wheat market. With 27% harvested according to this week's Crop Progress report, threshing is going smoothly there. In addition, wheat is doing well in the US with 49% receiving a good or excellent rating from the USDA. If the weather continues to cooperate for American wheat growers, the wheat harvest in the US could be larger than previously estimated, according to some analysts. This explains the moderate mood on the wheat market. Of the last fifteen trading sessions, the CboT closed lower for thirteen days. According to analysts, the negative trend is somewhat reinforced by the technical indicators.
Ailing Europe
Little attention is being paid to the upcoming wheat harvest in Europe. The wet and dark growing season in large parts of Western Europe has dampened yield expectations. However, the harvest has yet to start in the largest wheat producer France. If yields there are disappointing, it could well cause a turnaround in the market. The EU is not yet satisfied with exports. In the current 2023/24 season, the EU has exported 16 million wheat until June 29,15. That was 30,73 million tons in the same period last season.
Market agency Argus has scraped the top in the harvest forecast for Romania. In the April forecast, Argus estimated the Romanian wheat harvest at 10,6 million tons and this has now been adjusted to 10,45 million tons. That would still be the largest harvest ever. The previous record dates from the 2021/22 season when 10,43 million tons of wheat were threshed in Romania. Argus has already issued a profit warning. “Warm weather forecast for the coming weeks will have a negative impact on yields, especially considering there is little moisture in the soil.” The yield expectation has otherwise been kept the same at 4,6 tons per hectare. The smaller harvest therefore comes from a smaller area than previously expected. Argus does see a shift towards crops such as winter wheat and barley at the expense of maize, which cannot be irrigated due to the pattern of warm and dry summers in recent years.
Emergency package
Corn is getting some support from the weather in China. According to some independent weather services, it is warm and dry in northern China - where most corn is grown. In about a quarter of the cultivation area the mercury has risen to approximately 37 degrees Celsius. The Chinese government has released the equivalent of $61 million for projects to cope with the drought.
Brazil is struggling with the tax increase on, among other things, soy exports. The rate of the Brazilian real fell to the lowest rate in thirteen months at 5,4297 per dollar. Brazil introduced export taxes to raise extra money for the state treasury. Soy importers are switching to other suppliers, so there are no additional tax revenues to close the gap in the budget. This in turn makes currency traders nervous, resulting in a falling real. To break the negative spiral, Lula's government is now calling for cuts in government spending. However, it is still unclear whether the export tax on soy is also under discussion.