Lower yield forecasts for wheat in Russia and Ukraine are not really taking hold in the market. Argus predicts a wheat harvest of 4,44 tons per hectare for Ukraine and Mars assumes 2,85 tons per hectare in Russia. The latter is especially interesting, because if that is correct, the yield will fall well below the five-year average. Argentina exported more grain last month compared to June 2023. Yet there is little enthusiasm among exporters. Brazil has plans to expand wheat cultivation and become self-sufficient.
The September wheat contract on the Matif closed yesterday €3,25 lower at €227 per tonne. Wheat also took a step back yesterday on the CBoT, down 1,4% to $5.61½ per bushel. Corn closed 0,9% higher at $4.02 per bushel. Soya was also in the green and up 0,5%. With that, soy closed at $11.65 per bushel.
Market agency Argus has lowered the yield forecast for wheat in Ukraine by 2,2 million tons to 20,3 million tons. This is partly due to lower hectare yields and partly due to a smaller acreage. The average yield is estimated at 4,44 tonnes per hectare against the record yield of 4,79 tonnes per hectare last season. A relatively late sowing date, large temperature fluctuations in April, unusually late frost in May and a dry and warm June are costing Ukrainian growers, according to Argus.
The JRC, the scientific office of the European Commission, provided an update on wheat in Russia yesterday. The total Russian grain harvest is estimated at 82,5 million tons. Last season, 93,6 million tons of wheat were threshed in Russia. This season, Russia is therefore heading for a 12% smaller harvest compared to last season. Compared to the five-year average, the harvest is 5% smaller. According to the JRC, the hectare yield will be 2,85 tons per hectare. Last season this was 3,17 tonnes per hectare and the five-year average is 3,02 tonnes per hectare.
Concerns despite resounding export figures
Argentina exported nearly $2 billion worth of grains and oilseeds in June. The Ciara Cec, the association of grain exporters, announced this yesterday. Compared to June last year, the export value was a quarter higher last month. Yet the Ciara Cec is anything but enthusiastic about exports. Compared to May, exports have fallen by 24%. “Grain exporters continue to face low ownership rates, as do soy processors, and permanently negative margins,” writes Ciara Cec. According to the association, almost 70% of the available capacity is not used. Grain exports are of great importance to the Argentine state because they are the largest source of US dollars. These hard currencies are desperately needed to meet the obligations surrounding the sky-high national debt.
Wheat in the tropics
Bearish news for the wheat market came in yesterday a report of the US Agriculture Attaché in Brazil. Brazil is now a net importer of wheat, but the Brazilian government has plans to become self-sufficient in that area. The country consumes more than 12 million tons of wheat while producing about 9,5 million tons. To boost production, Brazil wants to expand cultivation on 4 million hectares of neglected and poor soil. Now wheat is not a crop that does well in a tropical climate and to combat that problem, Brazil is using 'tropical wheat varieties'.
Farmers in central Brazil are interested in wheat as a second crop after soy. A second crop provides additional income, it helps to suppress weeds in the period when there is no soy, corn or cotton (the most important crops in the region) and is beneficial for moisture management. However, there are still a few hurdles to overcome if wheat cultivation is to become successful. The soil in the area is generally low in phosphate and potassium and wheat is especially sensitive to phosphate deficiency. Due to the high temperature and humidity, the fungus Pyricularia grisea flourishes there. This is a difficult fungus to combat that costs a lot of yield.