Drought gains grip on wheat market

The March wheat contract on the Matif closed €2 higher at €234,50 per tonne in the last trading session. On the Chicago exchange, wheat also rose and closed 0,7% higher at $5.66½ per bushel. Corn and soybeans took a step back in the last trading session. Corn closed 1,4% lower at $4.90¼ per bushel. The loss in soybeans was slightly larger at 1,6% to $10.44 per bushel.

The polar wind that brought cold weather to the US has now made way for milder weather. However, the weather in the US continues to keep the wheat market busy. First of all, of course, because of the wintering of the wheat. Now there are concerns about drought. It was already on the dry side in the northern prairie states and now that drought is spreading further to the winter wheat states of the US, Kansas and Oklahoma.

Drought or rather a lack of snow in parts of Russia is another factor that has caused a more settled mood on the wheat market. If there is another real frost in the second half of February, that could cause problems. According to the Russian Ministry of Agriculture, however, 27,8% of winter wheat is in good condition and 54,1% is in good condition on average. Russian Deputy Minister of Agriculture Andrei Razin did add some words of caution to the otherwise positive figures. "The situation of winter crops is difficult. In the Caucasus regions, they practically sowed in the dust and we had to wait a long time for moisture. That has not done the state of winter crops any good. But so far we have not had to make major write-downs on the crops. In some provinces, the situation is even improving because there is more moisture available," Razin said at the agricultural congress in Moscow.

Russia is suffering from European Union sanctions when exporting grain. That is at least what the Russian Central Bank claims. The EU has imposed sanctions on 79 ships, including four on charges of endangering economic survival or food security. This could be the transport of stolen grain, for example. According to the Central Bank, Europe has added more than fifty ships to the sanctions list. All in all, this is putting pressure on Russian grain exports.

Trump's Trade War
The threat that Trump will unleash a trade war by imposing import duties is being taken more seriously by the grain trade. Trump said yesterday that he wants to follow through on his threat to impose a 25% import duty on products from Canada and Mexico as of February 1 (tomorrow!). The president has not yet decided whether oil from these countries will also be subject to the duty, he told reporters in his Oval Office. Trump also mentioned the plan to increase the import duty on products from China. The import duties are not a major problem for American agriculture. A possible backlash is. In the short term, it is mainly the relationship with Mexico that analysts are concerned about.