Half of US wheat is facing drought

The March wheat contract on the Matif closed yesterday up €0,25 at €193,25 per tonne. On the CBoT, wheat rose more, closing 6 cents higher at $5.71¾ per bushel. Corn saw a more modest increase of 2¾ cents to $4.33¼ per bushel. Soybeans, unlike grains, fell slightly on the Chicago exchange, closing 0.5 cents lower at $11.47¾ per bushel.

Ukraine continues to face problems exporting grain via the Black Sea. Nevertheless, the Ukrainian national railway company Ukrzaliznytsia has transported approximately 2 million tons of grain to Black Sea ports so far this month, the company reported yesterday. This represents a 2% increase compared to January, but grain transport is 1,4% behind the February 2025 figure for the same period. "This year, due to attacks on (railway) infrastructure and power substations, we are facing challenges that we did not face, or faced much less, last year," Reuters quotes the railway company as saying.

Russian attacks on Ukrainian ports and infrastructure have reduced export capacity by up to 30% compared to before the war began four years ago, Reuters reports. Furthermore, the attacks have significantly increased freight costs. Ukrainian companies are struggling with these additional costs and are being forced to cut margins to remain competitive in international markets. The regular power outages caused by the Russian attacks exacerbate this situation.

Drought 
In the US, drought is supporting the wheat market. Half of US winter wheat is in an area where drought is a problem, according to the latest drought monitor. Last week, that percentage was 46%, and this week last year, 22% of the wheat acreage was affected by drought. The largest winter wheat state, Kansas, has so far managed to avoid the drought relatively well. Rain is forecast for the southern prairies. If it does fall, it would be just in time for the wheat emerging from winter. The situation is more worrisome for the states of Nebraska and Wyoming. Due to the combination of strong winds and a relative humidity of around 10%, the US National Weather Service has issued a wildfire warning.

India was on track for a very good grain harvest. However, extreme heat forecast for March could throw a wrench in the works. Maximum and minimum temperatures in the northern and northwestern states are likely to be significantly above average in March, according to an Indian Meteorological Department official told Reuters. Maximum temperatures in March in Punjab, Haryana, Rajasthan, Uttar Pradesh, and parts of Madhya Pradesh are expected to be up to 7 degrees Celsius above normal. Temperatures could reach 40 degrees Celsius before the end of the month. Winter wheat and rapeseed sown in October will almost certainly face heat stress. Indian farmers sowed record wheat and rapeseed acreage last autumn.

Biofuel
The soybean market remains nervous. Trump and Xi are scheduled to meet in April. Various media outlets are reporting that preparations for this summit are not going smoothly. The planning is facing obstacles and coordination is lacking, according to reports. Traders see this as a sign that no decisions will be made during the meeting between the leaders of both world powers.

Trump's biofuel plans have generated support for corn and soybean oil. Small refineries in the US can obtain an exemption from the biofuel blending requirement for fossil fuels. Various American media outlets report that Trump wants large refineries to take over half of the requirements covered by the exemption. The oil industry opposes this, arguing that the blending requirement will increase costs for oil companies. However, the additional blending requirement could create increased demand for soybean oil and ethanol made from corn.