Analysis Grains
Tight supply drives wheat to record levels in India
In Europe and America, the grain market continues to struggle. An improved condition of winter wheat in the US and moderate exports for the EU are putting pressure on the wheat market. India faces problems of a completely different nature. Due to high demand and tight supplies, wheat prices in India have surpassed the €300 mark. Getting the wheat price back under control is a major challenge for the Indian government. In South America, the new soybean season has started slowly. There is currently a dry period, allowing farmers to prepare their fields with seeding machines.
The December contract for wheat on the Matif closed €2 lower at €214.25 per ton yesterday. Wheat on the Chicago exchange saw a significant decline for the second consecutive day. The December contract closed 2.3% lower at $5.52¼ per bushel. Corn traded more sideways and closed 0.3% lower at $4.28½ per bushel. Soybeans fell in between wheat and corn, losing 0.8% to close at $10.03½ per bushel.
Winter wheat in the US is in better condition than a week ago, as shown in this week's Crop Progress report, which was delayed by a day due to Veterans Day in the US. 44% of the acreage now receives a good or excellent rating from the USDA. This was 41% last week and 47% at the same time last year. With the recent rain in the southern prairies and a large part of the corn belt, the condition of winter wheat in the US is expected to further improve.
Of the planned winter wheat acreage, 91% has been planted, compared to 92% at the same time last year and 93% in the five-year average. Corn and soybean harvests in the US are mostly complete, with 95% and 96% harvested, respectively.
Moderate exports for Europe
In Europe, the focus has been on wheat exports so far this season. Until November 10, 8.34 million tons of wheat have been exported, which is 30% less than the same period last season. Major buyers such as Egypt, Morocco, and Algeria have imported less wheat from the EU. Several analysts point out that due to the wet growing season, the EU also has less wheat available for export this season.
Ukraine is urged to use more of its own agricultural raw materials. This call was made by the Ukrainian Minister of Agriculture. Ukraine is a major exporter of grains and vegetable oils but is also a significant importer of food. According to the minister, Ukraine produces about 90% of all agricultural goods it needs. By using more domestically produced food, money can be allocated for the military and the fight against Russia. Earlier this fall, Ukraine launched a campaign to encourage Ukrainians to buy more Ukrainian goods to support domestic producers.
Record price in India
While the wheat market in Europe and the US is struggling, the situation is quite different in India. Due to tight supplies and high demand, wheat prices in India have skyrocketed. Despite the high price, players with stocks are cautious about releasing them to the market. Wheat is being traded at record prices of around 30,000 rupees (approximately €335) per ton. In April, the wheat price was at 24,500 rupees (approximately €273) per ton, and the intervention price last harvest was at 22,750 rupees (approximately €253) per ton. The simplest way to lower the wheat price is to release intervention stocks to the market. However, this is easier said than done.
By early November, the Indian government had about 22.3 million tons of wheat in stock. This is 400,000 tons more than last year but well below the five-year average of 32.5 million tons. According to local sources, if the Indian government does not release a significant amount of wheat from its stock, the wheat price will continue to rise. Due to the relatively limited intervention stock, there is a constraint on what can be sold. If, for example, about 10 million tons are released to the market as in the previous season and the upcoming harvest (with the first batches available in March) disappoints, the country will have no room to absorb such a setback.
Smooth soybean planting
In Brazil, soybean planting is progressing steadily. According to AgRural, 67% of the planned acreage has been planted. Last season at this time, it was at 61%. The weather is cooperating fairly well for Brazilian farmers. After last week's rainfall, it is currently dry, allowing farmers to use seeding machines in the fields. The Rosario grain exchange also shared favorable news. The recent rain has subsided. "Farmers can easily plant soybeans," wrote the exchange. Looking ahead about a week, chances of rain in Argentina and Brazil are expected to increase again according to weather services.
