Analysis Grains
Will Russia follow Western wheat prices?
The rally in the wheat market came to a halt yesterday. Whether this is temporary or not is subject to debate. Russia could be the deciding factor. The country has taken on the role of price fighter in the grain market. The question is whether Russian exporters are now daring to increase prices.
The September contract for wheat on the Matif closed €3 lower at €203.75 per ton yesterday. The December contract lost €2 to €218.50 per ton. Wheat on the CBoT fell by 0.8% and closed at $5.61 per bushel. Corn mostly moved sideways and eventually closed half a cent lower at $3.90 per bushel. In contrast to grains, soybeans closed in the green. The oilseed showed a modest increase of 0.2% to $10.08¼ per bushel.
It is not surprising that the wheat market paused during the last trading session. For wheat to take the next step, Russia will also need to join the rally that Europe and North America experienced in the past period. Whether this will happen is another question. Russia has the role of price fighter and Russian exporters have so far been cautious about price increases. The Kremlin is not always happy about this due to the taxable value. The Russian Ministry of Agriculture has left the forecast for the total grain harvest unchanged at 132 million tons.
In France, the wheat harvest is 26% lower than last season. This is reported by the growers' association AGPB. The club expects a harvest of 25.98 million tons this season compared to 35.08 million tons last season. The reason for the smaller harvest is easy to guess: the extremely wet growing season. From sowing to harvest, it has hardly been dry.
Drought forces different choices
Warm and dry, that's how the summer in Ukraine can be summarized. And for now, there seems to be no change in that weather pattern. Not bad for harvesting corn and sunflowers, but less favorable for sowing winter crops in the dry weather. According to some local sources, farmers are adjusting their cropping plan. Rapeseed is losing popularity, especially because sowing rapeseed in dry soil without rain in the forecast is a big gamble. The rapeseed area could drop below 500,000 hectares this season according to sources. Compared to last season, over 200,000 hectares less have been sown so far, according to the data from the Ukrainian Ministry of Agriculture. By September 2, 446,000 hectares of rapeseed have been sown.
Winter wheat is gaining popularity among Ukrainian growers. The area could exceed 5 million hectares this season. For comparison: last season had 4.7 million hectares of winter wheat. Wheat also needs moisture. The likelihood of rain later in the autumn increases, and wheat can be sown later without compromising potential yield. However, a late start for wheat is also a risk for Ukrainian growers due to the possibility of winterkill.
