Analysis Grains & Commodities
Drought affects the wheat market more than cold
The wintry weather in parts of Europe is having a limited effect on the wheat market. This isn't entirely illogical. It's cold, but for the truly damaging cold that wheat suffers, we have to go to the edges of Europe. Drought in the US is making trade in the US more nervous, although wheat isn't doing badly. China has become quite comfortable with the US when it comes to soybeans. Incidentally, the US's main competitor, Brazil, isn't too worried about this.
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Choose the subscription that suits youThe March wheat contract on the Matif closed yesterday €2,50 higher at €191,50 per tonne. On the CBoT, wheat also closed higher, up 7 cents to $5.18 per bushel. Corn saw a more modest gain of 2 cents to $4.46 per bushel. Soybeans were the biggest gainer on the Chicago Stock Exchange last trading session, up 10 cents to $10.52 per bushel.
In the US, there are concerns about the condition of winter wheat. Large parts of the prairies are dry, and weather models predict this drought will likely last until spring. The USDA has rated 60% of winter wheat in Kansas (the largest wheat state) as good or excellent. This was 62% in the previous update in November. This means winter wheat in Kansas is in better shape than in January of last year, when 47% of the area received a good or excellent rating. Wheat conditions have also deteriorated slightly in Colorado, Nebraska, Texas, and Oklahoma. Approximately 40% of winter wheat in the US is located in drought zones.
The cold is not too bad
In Europe, it's not drought but cold that's preoccupying analysts. The snow we experienced in the Netherlands, but also in neighboring countries, caused traffic disruptions. After a brief period of milder weather, colder weather is returning to our region, but this isn't causing much commotion in the grain market. Temperatures in Europe aren't dropping to levels where wintering out wheat is a real risk. For now, the real cold remains reserved for Russia and Scandinavia. Incidentally, there are no reports yet from Russia of widespread frost damage to wheat there.
Chinese purchases of US soybeans have buoyed the market. Although the USDA has not published any new exports, some sources suspect that China has secured some additional shipments of soybeans in the US. Total US exports are estimated to be around or above 10 million tons, according to sources.
Brazil will likely export 10 million tons less soy to China in 2026. This is the forecast by the Brazilian grain traders' association, Anec. According to the group, this reduced export volume is a direct result of Chinese demand for soy from the US. Some of the Brazilian soy that will therefore not go to China will likely go to other traditional buyers in Asia and Europe, according to Anec. Spain, Thailand, Turkey, and Iran are among the destinations mentioned.