Analysis Grains
Fear of unrest in the Black Sea region diminishes
Wheat started the new week with a significant correction. Tensions in the Black Sea region played a significant role in the higher wheat prices last week. The fear of a new escalation between Russia and Ukraine is now diminishing. In the US, the harvest of corn and soybeans is ahead of the multi-year average. However, analysts were particularly interested in the rating of corn in the new Crop Progress report from the USDA.
Wheat closed €4.50 lower at €220.50 per ton on the Matif yesterday. On the CBoT, wheat fell by 2.7% to $5.78½ per bushel. Corn and soybeans held up better on the Chicago market. Corn lost 0.6% to $4.10¾ per bushel. Soybeans limited the loss to 0.2% to $10.05½ per bushel.
The tension in the Black Sea region - which played a significant role in the wheat rally last week - has slightly eased according to analysts. Last week, Russia fired on a merchant ship loaded with grain just outside the territorial waters of Romania. The possibility that Ukraine might be allowed to use Western long-range weapons for targets further into Russia and a potential response from the Kremlin caused unrest that also affected the wheat market. The threat remains, but the risks are now considered slightly less significant in the wheat market.
Russia exported 990,000 tons of grain last week according to SovEcon data. This is 70,000 tons less than the previous week. The vast majority of Russian grain exports consist of wheat, namely 980,000 tons. The price for Russian wheat has increased slightly. Ikar sets the price for Russian Black Sea wheat at $216 per ton. This is $1 higher than last week.
More bearish news for wheat came from Canada. Statistics Canada estimates the total wheat harvest at 34.3 million tons. This is 4.1% higher than last season's wheat harvest. The previous forecast expected a wheat harvest of 34.4 million tons.
Smooth start to the harvest in the US
In the US, combines are harvesting corn and soybeans. According to the USDA's Crop Progress report, 9% of the corn acreage has been harvested. The five-year average for this week is 6%. This week also includes the first soybean harvest figures in the report. Harvesting is off to a smooth start with 6% harvested compared to 3% in the five-year average and 4% last season.
The condition of corn has slightly improved. 65% of the acreage is rated good or excellent, up from 64% last week. Soybeans, on the other hand, have declined slightly with 64% rated good or excellent compared to 65% last week. Some analysts have reservations about these figures. In the eastern corn belt, it is dry and no significant rain is forecasted for the next ten days. Dry weather is favorable for harvesting mature or nearly mature fields. Corn and soybeans that still need to set require moisture for the final bushels.
The harvest of spring wheat and barley is nearing completion in the US. 92% of spring wheat has been harvested and 94% of spring barley has been brought in. Winter wheat planting is progressing steadily. 14% of the planned acreage is planted compared to 13% this week in the five-year average. Farmers in Washington state are the furthest along with planting. 43% of the planned acreage has been sown there.
