Drought and expensive fertilizer put pressure on growers

Drought is a key theme in the grain market. It is dry on the American prairies. In southeastern Europe, the moisture shortage is becoming quite acute. The new Hungarian prime minister announced emergency measures last weekend to help farmers. In Romania, the lack of rain combined with high fertilizer prices is prompting changes in crop rotation, according to Bloomberg research. The May contract for wheat on the Matif closed yesterday €0.50 lower at €191 per tonne. On the CBoT, wheat closed 5 cents higher at $6.29½ per bushel. Corn rose 5½ cents to $4.73¾ per bushel. Soybeans were the biggest gainer in Chicago during the last trading session, up 19¾ cents to $12.07½ per bushel. It is relatively dry in Western Europe, but for grains there is still no real reason for concern. The rain last weekend in parts of Western Europe was more than welcome. Further east and southeast in Europe, water concerns are mounting. The new Hungarian prime minister Peter Magyar, who will take over from Viktor Orban on 9 May, announced emergency measures last weekend to help farmers after April was also very dry in Hungary and the problems with severe drought are worsening. Magyar is calling for direct short-term aid and longer-term water-saving plans. We urgently need an action plan to minimize the impact of the severe drought expected this year, both for water resources and for the protection of nature and the landscape and agriculture, Magyar said. Watching the costs In Romania, corn is falling out of favor with arable farmers because of drought and high production costs. That is at least what research by news agency Bloomberg shows. According to a survey by the agency among traders and analysts, the corn area is set to be the smallest since 2015. This season, around 1.6 million hectares of corn will be sown in Romania, compared with almost 2 million hectares last season. If the forecast comes true, the area will shrink by almost 20%. The reason for the weaker interest among growers in Romania in corn is twofold. Especially the west and the south of the country have already gained considerable experience with drought. This season is again likely to be a very dry year. In recent months, very little rain and snow has fallen by Romanian standards. As a result, there is hardly any moisture reserve in the soil. Another factor is the higher price of fertilizer due to disruptions in the Strait of Hormuz. Margins in agriculture are already not great, and a crop like corn that requires relatively high nitrogen inputs and is a fairly expensive crop is quite a gamble. That is not an exclusively Romanian problem, by the way. Earlier, a growers' association in France also raised the alarm. It estimates that up to 15% less corn could be sown in France due to the sharply increased production costs. Poor growing conditions and expensive fertilizer have led Mihai Sadica, an arable farmer in Romania, not to sow corn this year. It is becoming increasingly difficult to make a profit from corn cultivation, even in irrigated areas, he told Bloomberg. Production costs have risen significantly, said Sadica, chairman of a local growers' association in Dobrogea, in southeastern Romania. The sales prices have not been adjusted accordingly. Wheat leading in the US In the US, drought is and remains an important theme. Still, winter wheat is doing slightly better. This week, 31% of the crop is rated good or excellent in the Crop Progress report, compared with 30% last week. Nearly half of the crop (49%) has headed. Source: USDA Sowing of spring wheat is somewhat behind previous years. Of the intended area, 32% is in the ground compared with 35% in the five-year average and 42% this week last year. Of barley, 49% has been sown compared with 43% in the five-year average. Last week's rain in large parts of the cornbelt did not cause much delay in corn sowing. Last week a quarter was sown and that is now 38%. That is the same as this week last year. The five-year average stands at 34% sown. Of the intended soybean area, 33% has been sown compared with 23% in the five-year average.