Rising dollar rate strengthens EU wheat position

European wheat is gaining ground on the international grain market due to a rising dollar. In addition, traders fear that extreme heat and drought in Europe will cause the wheat harvest to be lower than previously expected. These are signals that are providing solid support to the wheat market. Yet that is not enough to push the market higher. On Tuesday the advance initially continued, but the trade eventually ended lower than on Monday. The wheat market has become trapped between heat and drought in Western Europe on the one hand and a smooth harvest in the United States and a global ample supply on the other. One day weather risks dominate, the next day harvest pace and supply weigh on the market. After a higher start, the Matif futures market in Paris closed Tuesday for September €1,25 lower at €205 per tonne. December is quoted there after a slight decline €6,50 per tonne higher. For May 2027, the price stands at €220 per tonne. In Chicago, prices for this year's contracts fell by more than 10 cents on Tuesday. July dropped to $5,86¾ per bushel. September closed below $6 at $5,97 per bushel. Converted into euros, the price decline on Tuesday amounted to around €3,50 per tonne. That made the decline on the CBoT larger than in Paris. The euro fell to just below $1,14, bringing the dollar to its highest level in more than a year. The value of the September contract amounts to €193 per tonne converted. December is €5 above that. The price difference between Paris and Chicago has widened over the past week by €2 (September) to €3 (December) in favor of European wheat growers. Heat wave The main focus is on France. Record heat with temperatures above 40 degrees is coming at a sensitive time for the crops. Especially in northern France there is a risk that grain filling will be disrupted, causing yields to be lower. Analysts are expecting a French wheat harvest that is at least 1 million tonnes below last year. More northern countries will also face heat this week. Despite fears of harvest damage, there is still a brake on the price. In the United States, the winter wheat harvest is progressing remarkably quickly. With 40% of the acreage harvested, the pace is well above the five year average. In addition, weather models predict rain for the northern Great Plains, which improves the outlook for spring wheat. That is putting pressure especially on Chicago wheat. Mixed signals are coming from the Black Sea region. Advisory firm SovEcon lowered the Russian wheat harvest forecast to 88,9 million tonnes. The sown area, at 25,8 million hectares, is the lowest since 2014. At the same time, the harvest remains large enough to barely affect the export position. Market bureau Agrus raised the harvest expectation for Ukraine to 24,1 million tonnes. French wheat to China A slightly positive signal for the European export market is that France has shipped a load of wheat to China for the first time in two years. That confirms that European wheat is becoming more competitive internationally. For corn, the heat wave in Europe may have greater consequences than for wheat. As a result, trade in corn is reacting more strongly. Analysts warn that the French corn harvest could fall below 10 million tonnes if there is no meaningful rain within ten days. That would mean the smallest harvest since 1990.