The grain harvest in Europe is off to a smooth and early start. This doesn't apply to the first weeks of the new export season. Wheat exports are 78% behind last season. In Russia, the harvest is progressing less smoothly, and yields are also disappointing. In the US, Trump likely unintentionally boosted the grain market, and this time, it wasn't the import tariffs that caused the commotion.
The September wheat contract on the Matif closed yesterday down €1,75 at €198,50 per tonne. On the CBoT, wheat closed 0,6% higher at $5.41¼ per bushel. Corn also closed higher, up 1% to $4.05¼ per bushel. Soybeans were the biggest gainer on the Chicago futures market last trading session, closing 1,9% higher at $10.13½ per bushel.
The new grain season (which started on July 1st) shows no break with the sluggish European exports of the previous season. From July 1st to July 13th, 246.000 tons of wheat were exported, according to figures from the European Commission. This is a whopping 78% lower than the 1,1 million tons that crossed the border in the same period last season. Algeria is the largest buyer so far, with 63.000 tons, followed by Cameroon with 52.000 tons and Lebanon with 30.000 tons. Barley exports stand at 361.000 tons, 26% lower than in the same period last year. In contrast to the moderate exports, the EU imported 81% less maize, amounting to 244.000 tons.
Despite grain prices being relatively low compared to recent years, global demand remains limited. Buyers quickly abandon the market if the price starts to rise, rather than riding the rally, some analysts write.
Drought takes its toll
In large parts of Western Europe, the grain harvest is ahead of the multi-year average, and yields are relatively good. A little further east, in Russia, the picture is quite different. SovEcon reports that 11 million tons of wheat have been harvested as of July 11th. This is 56% less than the 24,8 million tons harvested at this time last season. Moreover, yields per hectare are disappointing. "Yields are significantly lower than last season. This is because harvesting is currently underway in Rostov and Krasnodar, the provinces hardest hit by the drought," SovEcon writes. Nevertheless, the agency raised its yield forecast for the Russian wheat harvest by 600.000 tons to 83,6 million tons. Ikar, on the other hand, lowered its yield estimate for the Russian wheat harvest, but at 84 million tons, it remains above SovEcon's forecast.
In Ukraine, the warm and dry weather is helping the grain harvest. According to the Ukrainian Ministry of Agriculture, 435.000 hectares of the approximately 5 million hectares of wheat have been harvested. The ministry is keeping the yield forecast unchanged at 20,7 million tons. The dry weather is less favorable for maize. The Ukrainian ministry lowered its yield forecast to 27,2 million tons. This would bring the average yield per hectare to 6,65 tons.
Independent
In the US, the grain market likely received unintended help from the White House. Rumors emerged that Trump planned to fire Jerome Powell, chairman of the US Federal Reserve. In 2017, Trump was responsible for Powell's initial appointment. Trump is dissatisfied with the Fed's interest rate policy, wanting to lower interest rates to stimulate the economy. Trump later denied any concrete plans to fire Powell. However, fear had already set in, and the dollar depreciated. Intervention at the independent Fed is significant. The weaker dollar, on the other hand, has made American products more attractive on the global market, and according to several experts, we saw the effect of this on the grain market.