Analysis Grains
Start of winter wheat is not ideal due to drought
The harvest of 2024 is not even completed yet and there is already a lot of speculation about the harvest of 2025. The start of winter wheat is not ideal in Russia and the US. Rain is more than welcome in the major wheat regions in both countries. In South America, the weather reports affect the mood in corn and soybeans.
The December contract for wheat on the Matif closed €1.50 higher at €227.75 per ton yesterday. On the Chicago exchange, grains closed in the green. Wheat increased by 0.9% to $5.85 per bushel. Corn made a similar move with also 0.9% and closed at $4.04¾ per bushel. Soybeans took a step back in the last trading session and closed 1.1% lower at $9.80 per bushel.
Drought remains a topic of discussion in the grain trade. In the south of Russia, it is too dry for winter wheat. In the Rostov region, only 6% of the average amount of rain has fallen since September 12. Rain is predicted for the area in the coming days. This is much needed according to local sources. The optimal sowing date for winter wheat is September, but due to the drought, farmers have waited. If sowing is much later, the wheat may not develop sufficiently when frost sets in. The lack of moisture is not only a concern in the Rostov province. According to the Commodity Weather Group, 40% of Russia is experiencing drought stress after the rain predicted in the coming days.
Drought does not affect yield potential yet
Market agency LSEG has kept the yield forecast for the upcoming wheat harvest in the US unchanged at 36.4 million. The sowing of winter wheat is progressing nicely in line with the multi-year average and rain is predicted for the southern prairies in the coming days. Rain is also much needed according to various sources. Some fields have been sown, but the seeds are dry.
Despite the lack of bullish news, the grain market is not declining further, according to some analysts, due to the relatively small wheat stocks resulting from moderate harvests in Europe and the Black Sea region. The downside potential is therefore limited. However, this does not mean that we have reached the bottom yet.
Playing it safe
Rain is in the weather forecasts for South America. The sowing of soybeans in Brazil is behind schedule due to the dry period. Corn and wheat in Brazil and Argentina are also in need of rain. Growing conditions seem to be improving, but the accumulated delay is not easily caught up. Some doubts about the yield potential of crops in Argentina and Brazil are underscored by Mexico. Data from the USDA shows that Mexican buyers have booked 1.6 million tons of corn in the US. Mexico is playing it safe, you could say.
