'The full impact of the Iran war has yet to be felt in the wheat market'

Attacks on energy production in the Middle East are driving up the oil price. Following this, the grains are affected. According to Bank of America, the real consequences of the closure of the Strait of Hormuz have yet to penetrate the grain market. The bank also anticipates that there is significant upward potential for wheat and corn. The May contract for wheat on the Matif closed yesterday at €2.25 higher at €207.50 per tonne. On the CBoT, wheat was also somewhat stronger, rising 2.5% by 14½ cents to $6.04¼ per bushel. Corn also closed in the green with an increase of 9¼ cents to $4.63¼ per bushel. Soybeans lagged a bit behind the grains, with a gain of 4¾ cents to $11.61¾ per bushel. The grain market is moving in all directions. The rise in crude oil yesterday is, according to various analysts, an important reason for the support in the grain market. The Iranian Revolutionary Guard threatened yesterday to attack energy facilities in the Middle East as retaliation for the Israeli attack on an Iranian gas field. This has proven not to be an empty threat. Iran conducted a rocket attack on an LNG plant in Qatar. Various sources report significant damage in Qatar. U.S. President Donald Trump has threatened to blow up a major gas field in Iran if the country attacks Qatar, a U.S. ally in the Gulf region, again. According to analysts, the fact that the energy sector in the Middle East is now facing targeted attacks marks a turning point in how the war has progressed so far. This does not lessen the uncertainty in the oil market and commodity markets in a broader sense. Wheat is, in this respect, one of the key commodities for food security. Bank of America wrote yesterday in a report that the wheat futures market has yet to feel the real consequences of the blockade of the Strait of Hormuz. The bank anticipates that there are significant upward price risks for wheat and corn. From a grower's perspective, this is quite reasonable. Damage in Russia is manageableIt is still early in the growing season, but winter wheat in Russia appears to have fared better through the winter than previously thought. LSEG has increased the yield estimate for the wheat harvest in Russia by 3% to 84.0 million tonnes, within a range of 81.3 to 87.3 million tonnes. The harvest of spring wheat remains unchanged at 23.9 million tonnes, while winter wheat has been revised upward to 60.1 million tonnes. The extremely cold weather at the end of January and the beginning of February in central Russia has resulted in less winter kill than previously thought. There was enough snow to protect the wheat from the worst cold, according to LSEG. Last month, temperatures in Russia were around or slightly above the long-term average with an average amount of precipitation. Warmer than normal weather is forecasted for the next two weeks with little or around the long-term average rainfall. However, April and May are the crucial months that determine the yield of wheat in Russia, according to LSEG, and not much can be said about that yet. Risks are increasingS&P Global Energy expects that U.S. farmers will plant 95.2 million acres (38.5 million hectares) of corn this spring. In the January estimate, the market agency anticipated an area of 95.0 million acres. According to the USDA, 98.8 million acres of corn were grown in the U.S. last season. The soybean area for the upcoming harvest is estimated by S&P Global at 85.0 million acres compared to 81.2 million acres. Prices for major arable crops have been rising since the end of February due to geopolitical tensions, notes S&P Global. “Although recent price developments have become somewhat more favorable for growers to plant extra corn, the higher fuel and fertilizer costs remain a point of concern,” the company writes in its commentary.