Analysis Grains
Heat affects wheat in largest producing country
Nothing is as changeable as the weather, but Donald Trump can also be quite unpredictable. It all depends on his mood swings during his press moments throughout the day. Yesterday, Trump once again caused confusion about when the import duties for Canada and Mexico will be implemented. Furthermore, corn remains the favorite of American agriculture. For the upcoming season, the USDA foresees an expansion of the corn acreage. This comes at the expense of soybeans and is not good for the corn price. In France, FranceAgriMer reports irreparable damage to winter grains due to a wet period in the winter. In India, wheat growers are also struggling with uncooperative weather for a top harvest.
The March wheat contract on Matif closed $2.50 lower at $220.50 per ton yesterday. On the CBoT, grains shed some weight yesterday. The March wheat contract, which is almost expiring, closed 3.4% lower at $5.46¾ per bushel. Corn lost 2.9% and ended at $4.64¾ per bushel. Soybeans moved more sideways and settled with a modest decrease of 0.2% to close at $10.22¾ per bushel.
The acreage forecast for corn and wheat in the US from the USDA presented at the Outlook Forum yesterday was a bit of a downer for market sentiment. Americans say 'Corn is king,' and looking at the acreage, corn is the backbone of American agriculture. The USDA expects 94,000 acres of corn to be planted next spring, compared to 90,600 last year. The wheat acreage is projected to be 1 million acres larger, reaching 47,000 acres. Soybeans, on the other hand, are losing favor with American farmers. The USDA estimates 84,000 acres for the upcoming growing season, down from 87,000 acres last season.
Another chapter can be added to the saga surrounding the trade tariffs of US President Trump. On Wednesday, he confidently announced that the 25% tariff on products from Canada and Mexico would be postponed by a month until April 2. Yesterday (Thursday, February 27), Trump seemed to have forgotten that and mentioned March 4 (next Tuesday) as the date for the implementation of the import duty. Additionally, Trump announced his intention to increase the tariff on products from China by another 10%.
In France, the wheat crop is looking mediocre. 73% of the acreage is rated good or excellent by FranceAgriMer, down from 74% last week. This is the second worst score in the last five years. Last year, after an extremely wet autumn and winter, wheat received a good or excellent rating of 68% around this time. Although it was relatively drier in France last week, the earlier winter wetness has already caused significant damage that is now irreparable in the winter grains.
Extreme Heat
In India - where the top of the European Union is negotiating a free trade agreement - farmers are facing a different kind of problem. According to weather reports, next month is expected to be the hottest March ever recorded. The maximum temperature in various provinces is likely to exceed 40 degrees Celsius according to the Indian Meteorological Department. This is detrimental to crops such as wheat, chickpeas, and rapeseed. February was already warm with heat stress, and if extreme temperatures continue into March, wheat, for example, could prematurely ripen, affecting the yield.
In India, wheat is sown from October to December, and the harvest typically runs from late February to May. After the EU, India is the second-largest producer of wheat. In the past three years, wheat yields have been low due to extreme weather conditions. As a result, wheat stocks in India have significantly decreased, leading to record high prices on the domestic market, reaching around €350 per ton. A successful wheat harvest would be more than welcome to stabilize the market. If yields disappoint again, experts believe India will have no choice but to reduce or eliminate the 40% import duty on wheat.
