Wheat market rises on more expensive corn and soybeans

The wheat market is receiving support again this week, but strikingly, the boost is not coming from the wheat market itself. The increase is mainly being driven by corn and soybeans. New weather concerns in the United States, rumors about Chinese purchases and rising oil prices are creating a new risk premium. Wheat is benefiting from that, although its own fundamentals remain less convincing. On the Matif, the September contract closed on Tuesday at €204.75 per tonne, half a euro higher. In Chicago, September wheat rose to $6.18½ per bushel, the highest level in two weeks. Wheat is thus following the advance in corn and soybeans, both of which have reached their highest level in about a month. The real driver behind the rally is currently the corn market. Weather models show a period of extreme heat in large parts of the US Corn Belt starting next weekend. This comes exactly at a time when a large part of the corn crop is in the pollination phase, the most critical period for yield. The market is therefore once again building in a weather premium. In addition, trade is counting on renewed Chinese interest in US grains. According to Reuters, the Chinese state buyer COFCO has now purchased at least 300,000 tonnes of US soybeans. In addition, increasingly persistent rumors are circulating that China has also requested quotes for US corn. Whether those purchases will actually follow remains to be seen. The expectation alone is creating extra buying interest from speculative funds. The rising oil price is also providing support. Due to mounting tensions around the Strait of Hormuz, crude oil and biofuels became more expensive. This indirectly strengthens demand expectations for corn and soybeans. Wheat has its own concernsAlthough wheat is benefiting from the positive sentiment, its own fundamentals remain mixed. In the United States, the winter wheat harvest is progressing steadily and the new supply is putting pressure on prices. Moreover, competition in the global market remains strong. For example, Jordan did not buy wheat on Tuesday during an international tender, a sign that buyers remain price conscious. On the other hand, the wheat market is not entirely free of weather concerns either. The quality of US spring wheat deteriorated slightly. In Ukraine, the agricultural union warns that the expected rainfall could delay the harvest and negatively affect baking quality. This reminds the market of the quality problems Ukraine also faced last season. In Europe, heat remains an important point of attention as well. France in particular is dealing with persistent hot and dry weather. For corn, this has now become a serious problem. The weather also remains a factor to watch closely for later harvested wheat fields and final quality.