European wheat market lacks direction as drought concerns clash with rising yield outlook

The European wheat market is struggling to find direction. In that respect, the Mars bulletin also offers little guidance. It warns of drought in central and eastern Europe, but the yield forecast is being revised upward. In the US, unrest in the Middle East and the higher energy prices that result from it are supporting the grain market. Drought has been a problem in the US for some time, and that is adding uncertainty, especially in the wheat market. The May contract for wheat on the Matif closed yesterday €0.25 lower at €194.50 per ton. The September contract, which is now the most traded, was unchanged at €209 per ton. On the Chicago exchange, wheat was on the rise and closed 2.2% or 13¼ cent higher at $6.21½ per bushel. Corn closed 5¾ cent higher at $4.60¾ per bushel. Soybeans were also in positive territory, up 13½ cent to $11.77¼ per bushel. Traders in the US appear more sensitive to developments in the Middle East than their colleagues in Europe. Iran has proposed lifting the blockade of the Strait of Hormuz and ending hostilities, according to the US site Axios. Later, Iran would be willing to negotiate over the country’s nuclear program. US President Trump is not open to that and believes there should be direct negotiations over Iran’s nuclear program. Brent oil rose yesterday to $108 per barrel. According to some analysts, the rising energy price dragged grains along in its wake. American wheat heading earlier than usual Another factor supporting the US wheat market is the drought affecting large parts of the US. Even so, the USDA did not change the condition of winter wheat compared with last week in the new Crop Progress report. 30% of the acreage is in good or excellent condition. In terms of development, winter wheat is ahead of the five-year average. 34% is now heading this season compared with 21% compared with the five-year average for this week. Source: USDA Sowing of spring wheat is slightly behind, with 19% sown this week this season versus 22% in the five-year average. Of the planned spring barley acreage, 34% has been sown compared with 29% in the five-year average. Drought does not only have disadvantages Farmers are making swift progress with sowing corn. A quarter of the planned area has been sown compared with 22% last season and 19% in the five-year average. What has been sown is also emerging relatively quickly. 7% of the corn is already up compared with 4% in the five-year average. Soybean sowing is also progressing well, with 23% already sown. By comparison, last season 17% had been sown this week and the five-year average stands at 12%. The dry weather is not bad for the progress of spring work, we can cautiously conclude. However, rain is in the forecast for this week and work could come to a temporary halt, several sources report. In Europe, the Joint Research Centre (JRC), the European Commission’s scientific bureau, is warning of drought in central and eastern Europe in this month’s Mars bulletin. There is still some moisture in the soil, so the situation is not yet critical, but as grains develop further and move toward flowering, extra moisture is needed. Even so, the JRC has raised yield forecasts for several major crops compared with the previous estimate. The average yield of winter wheat is now estimated at 6.05 tons per hectare, compared with 5.98 tons per hectare in March. Winter barley has been raised by 0.1 ton to 5.23 tons per hectare. For rapeseed, the estimate has been raised from 3.22 to 3.25 tons per hectare. Source: JRC Mars bulletin According to various sources, Saudi Arabia has secured 985,000 tons of wheat in a tender. The country had aimed for 710,000, but has thus bought significantly more. Prices in the tender are said to range from $273 to $285 per ton C&F (free on board). Most of the wheat for June to August delivery in the tender would come from the Black Sea region. Some is also being filled with European wheat. Sellers from North and South America and Australia also bid in the tender, according to sources. The Egyptian government has begun buying wheat from the new crop from domestic growers. According to the Egyptian Ministry of Agriculture, 363,000 tons of wheat has been purchased since the beginning of this month. Rejected The Netherlands has blocked at least two ships carrying soybean meal from Argentina. The reason is that the soybean meal contains traces of genetically modified soy not allowed on the European market. This involves the HB4 gene, which makes soy more drought tolerant. In the US and China, soy containing this gene is allowed, however.