Analysis Grains & Commodities
Weather extremes have limited effect on market
Cold weather in the US is nothing unusual. The fact that there is more snow in the Mississippi Delta than in the Corn Belt is exceptional. For the wheat market, however, the lack of snow on the prairies at these low temperatures is more relevant. The spread between the old and new wheat harvest does not show the usual pattern. Brazil comes with a new yield forecast in which it once again shows itself as an agricultural superpower.
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Choose the subscription that suits youThe March wheat contract on the Matif closed yesterday €0,25 higher at €230,25 per tonne. On the Chicago exchange, wheat remained unchanged at $5.54 per bushel. Corn and soybeans were on the rise during the last trading session. Corn closed 1,1% higher at $4.89¾ per bushel. Soybeans gained 0,9% to close at $10.65½ per bushel.
The weather is a bit out of whack. Ireland and the UK are experiencing the worst storm in decades, possibly even hurricane force. In the US, the winter weather is still the talk of the day. It is not unusual that it is freezing and that snow is falling. It is exceptional that there is more snow in New Orleans than in Chicago. Parts of Alabama, Florida and Georgia are also covered in a white blanket. On the southern prairies where most winter wheat is grown, hardly any snow has fallen. The chance that wheat has wintered out in the US is real and that is creating a somewhat stable undertone in the wheat market.
Other notable news from the US is the new Secretary of Agriculture Brooke Rollins. Between 2003 and 2018, Rollins was the director of a conservative think tank that was very critical of the use of bioethanol in fuel. Ethanol would be bad for emissions and increase food prices. Growers' organizations are generally in favor of biofuels. They see it as a stable market in which any surpluses can be worked off.
Scatter
On the futures markets it is noticeable that the contracts for the new crop are almost equal or higher than the current contract. The March contract closed on the CBoT at $5.54 per bushel, while the July contract closed at 578¼ per bushel. On the Matif the difference between the first contract of the new crop and the current contract was €0,50. Some analysts believe that the relatively low price for the old crop is a result of reluctance on the part of growers and traders to sell at this level. As a result, a relatively large amount of wheat remains above the market and this in turn has a price-depressing effect on the market.
Brazil’s Conab agency, which falls under the Ministry of Agriculture, estimates the total harvest of grains and oilseeds for 2024/25 at 322 million tons. That is 8% more than last season. Soybeans are the largest crop with 166 million tons. The yield per hectare is estimated at 3,5 tons compared to 3,2 tons per hectare last season. The total corn harvest is estimated at 120 million tons. The total cultivated area in Brazil has grown by 1,6% to 79 million hectares.