Analysis Grains
Wheat in the US not protected from cold everywhere
The European wheat export is not abundant this season. FranceAgriMer expects that French wheat exports this season will drop to the lowest level since 1996/97. The weather forecasts give some conflicting signals. Mild temperatures in the Black Sea region reduce the risk of winterkill, while it will be cold again this weekend on the southern prairies in the US. Rain in Brazil is beneficial for growth, but hinders the early soybean harvest.
The March wheat contract on the Matif closed €3 lower at €228.25 per ton yesterday. On the CBoT, wheat closed 0.1% higher at $5.47 per bushel. Corn made a more convincing move upwards with a 0.9% increase to $4.78¾ per bushel. Unlike grains, soybeans lost some ground on the Chicago exchange. The March contract closed 0.5% lower at $10.42¾ per bushel.
FranceAgriMer keeps the export expectation for French wheat to countries outside the EU this month the same as the December forecast. The agency, which falls under the French Ministry of Agriculture, expects an export of 3.5 million tons this season. That is 66% less than last season and the smallest export since at least 1996/97. Last month, FranceAgriMer stated that the export is at its lowest level since 2000/01.
Combination of factors
According to FranceAgriMer, the moderate export this season is due to disappointing demand from Algeria and China. Due to diplomatic tensions between Paris and Algiers, no French wheat has gone to Algeria this season. China is also buying significantly less wheat from France this season. The moderate to poor wheat harvest in France also plays a role in the moderate export, as well as the strong competition from relatively cheap wheat from the Black Sea region according to FranceAgriMer. Ukraine exported 23.6 million tons of grain by January 15 compared to 20.6 million tons last season, as announced by the Ukrainian Ministry of Agriculture yesterday.
The export expectation for barley has been reduced by 200,000 to 1.9 million tons by France AgriMer. This is half of what was exported last year mainly due to disappointing demand from China. The corn stock has been revised upwards. The agency has increased the stock from 2.7 million tons in December to 2.8 million tons this month. This is the largest stock in ten years.
Always something with the weather
The weather forecasts give some conflicting signals. Relatively mild weather for the time of year is predicted for the Black Sea region. Further north in a band from Belarus to the northern Caucasus, it is colder, but there the cold front was preceded by snow. The risk of winterkill is therefore small according to experts. Concerns about winterkill of wheat are increasing in the US. Freezing temperatures up to 7 degrees are forecasted this weekend in parts of Oklahoma, Kansas, and Texas. The chance of precipitation is estimated by the US weather service at 30% to 50%. The risk of frost damage is real in places where no snow falls according to local sources.
Soybeans were under pressure in the last trading session due to good harvest forecasts for Brazil. Meteorologists also expect sufficient rain for the crops in the northern and central parts of Brazil to continue growing in the coming week. In the southern part, where it is dry, the chance of rain is also increasing. The downside of the changeable weather is that the harvest of early soybeans is progressing at a slower pace. This, together with the warm dry weather in Argentina, limits the room for soybean prices to go down according to various analysts.
