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Analysis Grains

Struggling euro gives wheat a boost

Friday 12:14 pm - Jurphaas Lugtenburg

At the Paris stock exchange, wheat rose to its highest point since last June. Analysts say the weak euro is giving wheat exports a boost. In the US, wheat took a hit due to a strong dollar. For corn and soybeans, the effect of the relatively high dollar exchange rate was offset by higher energy prices.

The March wheat contract on the Matif closed €2 higher yesterday, reaching €239.25 per ton. This is the highest closing price since early June. On the CBoT, wheat took a step back and closed 1% lower at $5.45¾ per bushel. Corn and soybeans moved more sideways but closed in the green. Corn increased by 0.2% to $4.59½ per bushel. Soybeans closed 0.1% higher at $9.99½ per bushel.

According to analysts, wheat on the Matif was on the rise due to the weak euro. This makes European wheat more attractive to international buyers. In the US, the opposite is true. American wheat exporters are struggling with a high dollar exchange rate. The weather forecasts are also helping European wheat. Wheat in the Black Sea region was already not looking good, and with limited rain expected in mild winter weather, little change is anticipated. Wheat from that region is a direct competitor of the EU.

Colder weather is expected for the prairies in the US. However, the impact on winter grains remains limited as the cold front is preceded by snow. Snow is not only welcomed on the prairies as protection against the cold, but it is also beneficial due to the dry conditions. When the snow melts later in the winter, the wheat will benefit once again. The latest drought monitor shows that a quarter of winter wheat in the US is facing drought. This time last year, it was 32%.

Support from the energy sector
Soybeans and corn are less affected by the relatively strong dollar on the Chicago stock exchange. Analysts attribute this to rising energy prices. This makes ethanol from corn and soybean oil more attractive for use in biofuel. Additionally, the drought in Argentina is also bullish for the market. No significant rain is expected in the South American country for the next two weeks.

The southernmost part of Brazil is also experiencing drought. However, in most of Brazil, the growing season is going according to plan. StoneX has significantly raised its yield expectation for soybeans in Brazil to 171.4 million tons, up from the previous forecast of 166.2 million tons. The export expectation has been increased from 103 to 107 million tons. StoneX has also raised the forecast for Brazilian corn harvest by 300,000 tons to 128.6 million tons.

Jurphaas Lugtenburg

Jurphaas Lugtenburg is a market specialist in onions, carrots, and commodities such as wheat, corn, and soybeans at DCA Market Intelligence. He combines his degree in business administration with a passion for farming.
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