Fuel and fertilizer costs are rising while grain prices are lagging, putting pressure on the cropping plan. Maize, in particular, is losing ground due to high costs and uncertainty in supply and demand. Read more about shifts in the grain market.
The May wheat contract on the Matif closed €0,75 higher yesterday at €204 per ton. On the CBoT, wheat closed 10 cents higher at $5.97¾ per bushel. Corn made a similar move, closing 1,7% higher at $4.67¼ per bushel. Soybeans lagged slightly behind cereals but closed in the green with a gain of 8¼ cents to $11.71¾ per bushel.
The unrest in the Middle East is certainly not making things any calmer on the grain market. The 15-point plan for peace with Iran initially put pressure on oil prices yesterday, and with it, a moderate sentiment in the grain market. Later in the day, Iran announced via state television that it did not take Trump's plan seriously. Subsequently, oil prices rebounded somewhat, and other commodities followed suit.
To date, the higher price of diesel fuel and more expensive fertilizer have been the most noticeable effects on the farm. In view of the higher costs, arable farmers are likely making different choices in their cropping plans. Earlier this week, organizations moved into Australia sounding the alarm. Yesterday, the French grain lobby Intercereales reported that some farmers in France are on the brink of collapse. Intercereales General Manager Benoit Pietrement warned Reuters yesterday that the survival of some farms is at stake due to rising fuel, gas, and fertilizer prices. "Farmers on the large plains in the north of France were reasonably well hedged (with fertilizer), but in the south, where more corn is grown, less fertilizer has already been committed, and I hear that farmers are replacing corn with sunflowers."
Sunflowers require less nitrogen and are, partly for that reason, a cheaper crop for arable farmers in the south of France. In 2022, shortly after the Russian invasion of Ukraine, French farmers also switched to sunflowers at the expense of maize due to high fertilizer prices. According to Pietrement, this year could well turn out to be the most challenging year ever for farmers. Fertilizer and energy have become significantly more expensive, while grain prices have barely risen. That is a major difference compared to 2022, when the potential absence of Ukraine from the world market drove up grain prices.
According to Pietrement, the moderate returns in arable farming could also have an effect on the acreage for the 2027 harvest. Farmers might well choose to leave a larger portion of their acreage fallow and rely more on subsidies from Brussels.
It is not only in France that arable farmers consider it a big gamble to sow a relatively expensive crop like corn. In the US, some analysts expect less corn to be sown. However, soybeans are mentioned there as the alternative crop instead of sunflowers.
A bright spot for American farmers is that bioethanol is gaining momentum due to high oil prices. E15 gasoline may now be sold in the US during the summer months, the Environmental Protection Agency (EPA) announced yesterday. This measure is partly intended to lower gasoline prices in the US and could further increase demand for 2025 crop corn in the near future.
Wheat is also receiving some support from the weather on the southern prairies in the US. It is already relatively dry, and little to no rain is expected for the area over the next ten days. Furthermore, warm weather for the time of year is forecast, combined with strong winds. These are precisely not the conditions that wheat growers in states like Kansas and Oklahoma are looking forward to.