US wheat gains as European prices stall

In a literal sense, there has been a chill in the air across parts of the United States. In the grain market, however, this attracted little attention. Still, just as the weather can change quickly, so too can trade dynamics. Europe appears to be charting a more independent course. For now, the focus remains firmly on corn demand. A relaxation of the rules for E15 gasoline could provide some support, but despite lobbying efforts from the agricultural sector, the US is not yet willing to take that step. The March contract for wheat on the Matif closed unchanged yesterday for the second day in a row at €189.50 per tonne. On the CBoT, wheat made a step up in the last trading session, rising by 7¾ cents to $5.15½ per bushel. Corn is a bit of a stark contrast with an increase of 2¼ cents to $4.24 per bushel. Soybeans moved more sideways, losing half a cent to $10.64 per bushel. The fact that wheat made a significant step on the Chicago market during the last trading session came as a surprise to various analysts. Part of this was contributed by the slightly weaker dollar, making American wheat more attractive for buyers outside the US. According to experts, a more important factor is the cold weather that is coming. The snowstorm followed by cold polar winds has been in the weather forecasts for a few days. However, there was little attention on the wheat market for that. Southern regions in the snowYesterday afternoon, American time, the National Weather Service issued a warning for a snowstorm and dangerously low temperatures at the end of this week in large parts of the US. The cold weather stretches from the northern US down to a line between Texas and South Carolina. The cold in the US is not quickly over. There is a good chance that temperatures will remain below average until February 4. For the southern prairies, some experts are talking about the largest arctic cold front coming in since February 2021. Because the cold is preceded by snow, this does not have to be a problem for winter grains. In places where no snow falls, winter kill is a real risk with the temperatures being predicted. In Russia, the winter weather is also becoming a risk. Market agency SovEcon has maintained the estimate for the Russian wheat harvest at 83.8 million tonnes. However, the agency warns that if the cold weather continues for another week, the harvest forecast must be adjusted downward. Minimum temperatures of 20 to 25 degrees below zero are being recorded in the area around Moscow. SovEcon is thus in stark contrast to the USDA's line earlier this month in the WASDE report. The USDA had raised the harvest estimate for Russia by 2 million tonnes to 89.5 million tonnes. BiofuelAmong agricultural interest groups in the US, there is dissatisfaction about not introducing the possibility to sell E15 gasoline year-round. The House of Representatives voted yesterday on a broad package of new legislation but decided to leave out the E15 provisions. E15 is gasoline with up to 15% ethanol blended in. This ethanol is largely produced from corn in the US. Extra demand for corn would be more than welcome for American farmers. The Iowa Corn Growers Association calculated that the extra demand for corn for the production of E15 could raise the price by 94 cents per bushel. The American Coalition for Ethanol, which includes farmers, small business owners, biofuel producers, and scientists, has also criticized this. Now that rural America is facing one of the toughest economic situations in a generation, Congress needs to realize the seriousness of the situation and finally make E15 available year-round. It is a logical solution that can directly stimulate the demand for corn, increase farmers' incomes, and save drivers money at the pump.