Drought has a stronger grip on corn than on wheat

Warm and dry weather continues to dominate in Europe. In the wheat market, this has limited impact. For corn, it is different. On the Matif, corn was rising quite strongly. In the US, growing conditions for corn are relatively favorable. The September wheat contract on the Matif closed yesterday €1 lower at €202 per tonne. On the CBoT, wheat lost 1½ cent to $5.90½ per bushel. Corn closed 4 cents higher at $4.25 per bushel. Soy also ended in positive territory, up 5½ cent to $11.31¾ per bushel. It is and remains relatively warm and dry in large parts of Europe. In the wheat market, this does not really take hold. In May, it briefly seemed as if wheat was starting to rise. In recent weeks, the Matif has remained around €200 per tonne. With the harvest cautiously starting in Southern Europe, it is historically not logical that a real turnaround will happen in the short term. Unless yields are really going to disappoint badly. There are more concerns about grain corn in Europe if you look purely at the futures market. Corn did show a rally in the past two weeks. Usually, the price of corn is around or slightly below the wheat price, but now corn is about €30 above wheat. The fact that wheat was already well advanced before the real heat set in, while corn still has months to go until harvest, plays a role here. The volumes traded are another factor that should not be underestimated. Yesterday, the September contract had about 230,000 open positions and a turnover of 33,000 contracts. The August corn contract had 9,000 open positions and a turnover of 800 contracts. The smaller overall market makes corn somewhat more sensitive to price fluctuations. Some analysts expect that the wheat market in Europe has reached a provisional bottom and that corn may well be the one to drive a recovery in the grain complex. The figures from the US, with greater than expected domestic use of corn, lower exports and a smaller ending stock from last year's harvest, combined with a likely disappointing harvest in Europe, are fuel for the bulls. Interest from China in European barley is also contributing to the mood. In the US, the exchanges are closed today for the Independence Day festivities. The United States celebrates that it broke away from the British Empire 250 years ago. In the run-up to a long weekend, the grain market showed some mixed movements. Wheat was somewhat under pressure despite the drought in the major growing regions of the US. Relatively favorable growing weather in the Cornbelt tempered expectations somewhat. Corn and soy were also rising a bit. For corn, this is linked to good demand for use in ethanol according to some analysts.