Falling oil price drags wheat down

It is warm and dry in Europe and in the US. The grains market no longer seems particularly impressed by that news. Developments in the Middle East and their impact on oil prices also weighed on the grains market. In the Black Sea region, which is at least as relevant to the grains market, things remain unsettled.The September wheat contract on Matif closed yesterday €3.50 lower at €229.25 per tonne. On the CBoT wheat closed 18 cents lower at $6.60 per bushel. Corn lost 12½ cents and thus settled at $4.51¾ per bushel. Soybeans were the biggest decliner in the past trading session on the Chicago exchange, down 39½ cents to $12.08½ per bushel. It is warm and dry in large parts of Europe. That is the conclusion drawn by the European Commission's Joint Research Centre (JRC) in the new Mars bulletin. From the Mediterranean region to Scandinavia, Europe has been experiencing unusually hot weather. From the Iberian Peninsula to southern Germany, there has also been a lack of rainfall. The average grain harvest in the EU has been revised down by 4% compared with June by the JRC to 5.4 tonnes per hectare. The yield estimate for wheat has been lowered by 2% to 5.66 tonnes per hectare. The largest downward revisions are for sunflowers and grain corn. For sunflowers the JRC has lowered the yield from 2.08 to 1.94 tonnes per hectare. That puts the expected yield 2% below the five-year average. For grain corn the yield estimate has been lowered by 6% compared with last month to 6.93 tonnes per hectare. The five-year average stands at 7.08 tonnes per hectare. Oil under pressureDespite the Mars bulletin confirming the severity of the weather conditions in Europe, the market reacted rather mildly. After almost two weeks of reciprocal attacks between the US and Iran, both parties are now talking again. Trump has shelved the plans to escalate the conflict and is now focusing on a diplomatic solution. Brent crude remains elevated at $88 per barrel based on yesterday's closing price, but unlike at the end of last week it is once again well below $100. The lower oil price is also having some effect on the grains market. The situation in the Black Sea region remains unsettled. During the night Ukraine reportedly fired 400 drones at Russia according to some sources. Three ships were reportedly hit yesterday. The grains market appears to be becoming accustomed to disruptions to shipping in the region. Market bureau Ikar has lowered the wheat yield forecast for Russia by 1.1 million tonnes to 90 million tonnes. The export forecast has been lowered by 3.7% compared with last season to 44.5 million tonnes. First spring wheat harvestedIn the US the winter wheat harvest is progressing steadily. 81% of the acreage has been harvested compared with 79% this week last year and the five-year average, according to the new Crop Progress report. The spring wheat harvest has also begun, with 2% harvested. The condition of spring wheat has remained fairly unchanged. 53% of the acreage is rated good or excellent, which is the same as last week. Corn conditions deteriorated somewhat this week in the US. 63% of the acreage is rated good or excellent compared with 67% last week. Last year 73% was rated good or excellent. According to some analysts the cause is the warm and dry weather that growers in the US have experienced recently. Soybean crop conditions also deteriorated somewhat, with 63% rated good or excellent compared with 66% last week.