The cold in the US has now largely been exchanged for milder weather. The polar wind has left its mark, however. According to a rough estimate by Commodity Weather Group, approximately 15% of the wheat has been wintered. Traders in Chicago were not really impressed by that news if we look at the stock exchange. Furthermore, Ukraine came up with area figures and Brazil is taking measures against high food inflation.
The March wheat contract on the Matif closed yesterday down €1,25 at €224,75 per tonne. On the CBoT, grains also closed in the red. Wheat lost 1,6% to $5.35½ per bushel. Corn closed down 0,9% to $4.82 per bushel. Soybeans were down 1% yesterday to close at $10.45 per bushel.
Last week’s frost in the US has killed up to 15% of winter wheat, according to the Commodity Weather Group (CWG). The lack of a protective blanket of snow left the crop vulnerable to frost damage as temperatures locally dropped to minus 21 degrees Celsius, writes Joe Woznicki of CWG. About 65% of hard red winter wheat belt (the area from Montana to Texas) in the US was affected by the polar vortex, an extension of a large low pressure area over the North Pole. About 35% of the soft red winter wheat belt (including Illinois, Indiana, Michigan and Ohio) has been hit by the cold. "If the wheat had been well developed, the wintering out in the areas that the cold front hit would have been limited to 10%," Woznicki said. In practice, it will be more like 15% because drought in several areas has left the winter wheat less developed and therefore more susceptible to wintering out.
Woznicki emphasizes that these are rough estimates. The actual damage will only be visible in the spring when the crop starts growing again. Assuming 10% frost damage and the yield figures for 2024, this would amount to 6,7% of the total harvest of hard red wheat that was lost and 3,5% of the soft red wheat. On the other hand, American arable farmers planted 2% more winter wheat last fall compared to the 2024 harvest year.
Russian wheat on the rise
Due to somewhat disappointing demand and reasonably good yield expectations (apart from the frost damage in the US), wheat was still under some pressure on the futures markets, according to analysts. Russia did not follow the price trend in Paris and Chicago. The price of Russian wheat was on the rise last week. Ikar increased the quotation by $2,50 to $236,50 per tonne.
The Ukrainian Ministry of Agriculture came up with a new area forecast. The total cultivated area of grain will remain approximately the same in 2025 as in 2024 at 11,1 million hectares. 5,2 million hectares have already been sown with winter grain, mainly winter wheat. The ministry said that 4,2 million hectares of corn will be sown next spring. That is 2,4% more than last season. Oilseed crops will be grown on 8,9 million hectares, according to the ministry. The areas of rapeseed and soybeans will be 8% and 9,4% smaller, respectively, to 1,2 and 2,4 million hectares. The area of sunflowers will grow by 5% to 5,2 million hectares, according to the ministry.
Inflation
The Brazilian government plans to lower import duties on food that is cheaper abroad than in Brazil. Expensive groceries are a sore point for social-democratic President Luiz Inacio Lula da Silva and are hurting his popularity. Official inflation was 2024% for 4,8, well above the 3% target. Food was a major factor in the inflation figures, rising by 7,7%. The upcoming harvest in Brazil looks promising and, together with the elimination of some import duties, food should become more affordable for Brazilian consumers. Lula's government is also looking at ways to stimulate the production of basic goods within the agricultural policy.