Weather forecasts put a floor in the grain market

The December wheat contract on the Matif closed yesterday €2,50 higher at €230,25 per bushel. On the CBoT, wheat also showed a plus, closing 0,8% higher at $5.89½ per bushel. Corn closed 0,5% higher at $4.06¾ per bushel. Soybeans followed the trend in the grain market, gaining 0,9% to $9.88¾ per bushel.

A longer period of steady dry weather is not granted to farmers in North-West Europe. If we are to believe the weather reports, this is not expected to change in the coming week. Fortunately, it is not as bad as last year, but various sources report that agricultural work is being delayed. The harvest of corn and potatoes, for example, is going rather slowly and farmers have also been further along with sowing winter grain around this time.

State of emergency in Kursk
In eastern Ukraine and western Russia it is too dry. Yesterday, the Russian region of Kursk declared a state of emergency. According to the local government, drought is causing the winter grains to fail. By declaring a state of emergency, affected growers can claim extra support from Moscow. Earlier, provinces in southern Siberia had already declared a state of emergency because of the weather. There, rain during the harvest was the problem.

Kursk is located on the border with Ukraine and is also the scene of the Ukrainian counteroffensive that started last August. Some rain has fallen in the south of Russia, but it is not enough to allow the wheat, which is lagging behind due to the drought, to recover in time.

Drought is not a problem that is unique to Russia. Farmers on the American prairies would also like to see some rain. Just over half, namely 52% of the winter wheat in the US is suffering from drought, according to the new drought monitor. Last week it was 47% and last year this week 48%.

Soy is an interesting market and, in addition to the weather forecasts, it cannot be seen separately from geopolitical tensions. Sowing soy in Brazil is starting later due to the long dry period. Some rain has fallen in the meantime and more is coming. This of course benefits the potential yield of soy. For China, which relies quite heavily on soy from Brazil, this is a signal that there is no need to look for other suppliers.

Political game
This is where the relationships on the world stage come into play. China had a knack for playing the US and Brazil off against each other. When there was a large supply from Brazil, they ignored soy from the US and vice versa. Now that Trump's chances in the race for the presidency are increasing again, this is a risky strategy for China. Both Harris and Trump are pursuing an isolationist course, with Trump in particular acting as a hawk towards China. According to the preliminary figures, growers in the US are bringing in a relatively good soy harvest. An excellent opportunity for China to keep calm for a while in the short term and to strike when American exporters start to get nervous about the large supply. That will be a gamble with a new American president in just over two months who wants to show his or her teeth.