It is going with a bit of a delay, but the weather premium in the wheat market is being increased. The cold in the east of Europe is an important driver behind this. The grain export of the EU remains only moderate. An expensive euro is an additional obstacle. On the other hand, more corn and rapeseed have been imported.
The September wheat contract on the Matif jumped yesterday, closing €6,75 higher at €209 per tonne. Wheat also rose on the CBoT, up 3,2% to $5.46 per bushel. Corn closed 1,6% higher at $4.54½ per bushel. Soybeans also closed in the green, but with a 0,2% increase it was much more modest than in grains. That brought the soybean to a close of $10.53 per bushel.
Low temperatures and even night frost in Eastern Europe are causing a stir on the wheat market. Last week, the Russian provinces of Belgorod and Voronezh declared a state of emergency due to frost. That sounds worse than it is. By declaring a state of emergency, extra money can be called upon from Moscow. Russian Minister of Agriculture Oksana Lut announced last week that the frost damage this season is not that bad. According to the ministry, only 100.000 have been wintered out, which is about 10% of what was lost last season due to the cold.
Dmitry Rylko, director of the Ikar market agency, agrees with the Russian agriculture ministry's reading. "We decided not to change our yield forecast yet, because we already assumed such a situation in previous forecasts," Rylko told Reuters. The drought in Rostov and Krasnodar is a bigger threat to grain yields than the recent frost, according to Rylko. Nevertheless, the quotation for Russian wheat from Ikar remained unchanged from last week at $247 a tonne.
Rain comes too late
In the US, the trade is somewhat concerned about the latest Crop Progress report. Although the planting of spring grains is going well this season, the wheat harvest could well be a bit lower than the USDA has been calculating so far. As the wheat stands now, the average yield in the US would be 52,6 bushels per acre (about 3,5 tons per hectare). That would mean a wheat harvest of 1.353 million bushels (about 36,8 million tons) if we assume the harvestable hectares predicted by the USDA. However, the USDA is assuming a harvest of 1.382 million bushels (about 37,6 million tons) of wheat.
Heavy rains in the southern US wheat belt are adding to concerns about wheat yields. Disease pressure is already high in the region and rain would only increase that pressure, some local sources say.
Low export rate
EU wheat exports remain difficult. Up to and including 18 May, 18,45 million tonnes of wheat were exported by the EU, compared to 27,89 million tonnes in the same period a year earlier. Barley exports are also not going smoothly. This season, 18 million tonnes of barley were exported up to and including 4,22 May, compared to 5,43 last year. The relatively strong euro of recent months is certainly not working in the favour of European exporters.
While exports are not really going well, more grains are being imported. Europe imported 17,69 million tonnes of corn. That is more than 1 million tonnes more than in the same period last season. Rapeseed was also imported considerably more. This season, the counter stands at 6,28 million tonnes compared to 5,07 million tonnes a year earlier.