Analysis Grains & Commodities
American armada hangs over grain market
Weather extremes influence the grain market's mood to a certain extent. The cold snap in the US had already been more or less absorbed by the market. Now, it's the extreme cold in Ukraine and Russia that is worrying analysts. On the other side of the world, in South America, it's not 30 degrees below zero but well over 30 degrees above zero, causing heat stress in crops. Geopolitical developments, and specifically Trump's "armada" en route to Iran, are primarily affecting oil. Some believe this could be an indicator of developments in the grain market.
Would you like to continue reading this article?
Become a subscriber and get instant access
Choose the subscription that suits youThe March wheat contract on the Matif closed yesterday €1,25 higher at €191,25 per tonne. On the CBoT, wheat also rose 5.5 cents to $5.41.5 per bushel. Corn moved more sideways, rising 0.5 cents to $4.30.5 per bushel. Soybeans fell slightly, closing 2.5 cents lower at $10.72.5 per bushel.
Cold weather is providing some support for the wheat market. The US saw snowstorms and extreme cold starting last weekend. Starting this weekend, parts of Europe will also experience colder weather. In the EU, severe frost is forecast for the Baltic states, Scandinavia, and Poland. Further east, weather models predict even colder conditions in Belarus, Russia, and Ukraine.
30 degrees of frost
In Ukraine, temperatures can drop to minus 30 degrees Celsius. "We consider the current cold spell extremely dangerous for winter crops in a significant part of Ukraine," market agency Barva Invest wrote on Telegram. The combination of very low temperatures and little to no snow makes winter grains and winter rapeseed vulnerable to wintering. The lowest temperatures are forecast for northern and eastern Ukraine, but some snow is expected there, according to some local sources. Southern Ukraine will experience less cold, but because there is no snow there, winter grains are far from safe.
In South America, it's not cold but heat that's causing problems. In northern Argentina and Paraguay, temperatures are 2 to 5 degrees Celsius above normal. Southern Brazil is also very hot, with temperatures well above 30 degrees Celsius. Rain is forecast for the Argentine pampas in the next two weeks. This will benefit corn and soybean growth. Weather models predict wetter than normal in central Brazil. This is beneficial for the second crop, but some local sources suggest it would be better for soybeans – which are just about ripe there – to remain dry.
The tensions between Iran and the US are having only a limited impact on the grain market. The unrest, however, was reflected in the oil price. Brent crude rose to $69,59 per barrel, its highest level since last August. Earlier this week, US President Trump himself spoke of a "gigantic armada" en route to Iran. A rising oil price can often be an indicator of what's happening with grain prices.