Analysis Grains
The sky above the grain market is not clearing up yet
Prices on the grain market were on the rise during the last trading session, but it's not all smooth sailing. There is unrest in the Black Sea region, but the grain trade seems to assume that the consequences are not severe. The weather could have more impact on the market sentiment, but it doesn't. The proverb 'a dry year comes to you and a wet year leads away from you' also applies to grains.
The September contract for wheat on the Matif closed €2.50 higher at €223.75 per ton. Wheat on the CBoT saw a slightly stronger increase, closing 2% higher at $5.54¼ per bushel. Corn also edged up and closed 0.9% higher at $4.06¾ per bushel. Soybeans moved more sideways and at the end of the trading day, it was 0.1% higher at $11.42¾ per bushel.
Yesterday, the grain market closed overall in the green, but it's not very convincing. The unrest in the Black Sea region is, for the time being, passing by the market, at least to a large extent. It was announced yesterday that Ukraine has seized a grain ship, which according to the Ukrainian intelligence service was loaded with stolen grain from the areas occupied by Russia. It remains to be seen how Moscow will react. The Kremlin signaled that Russia will not let it go easily, stating that it sees movement from NATO. According to the Kremlin, NATO equipment is being moved towards the Russian border.
Flooding
The weather forecasts also did not have the expected impact on the grain market. In our region, it's the usual story of rain and few workable days. Localized flooding is reported in the Midwest of the US. Although water was welcome in parts of Iowa and Illinois, there has been too much rainfall. The Mississippi River (including its tributaries) is high, making water drainage difficult according to some experts.
Drier but especially warmer weather is on the way in the US. Heat could cause stress, but water is not a problem for a change after years of mainly drought. A large part of the Midwest is also not shaded on the drought monitor this week.
The growing season for corn and soybeans in the US is progressing fairly smoothly. Whether the farmer will benefit from it remains to be seen. The prices for these major crops in American agriculture have fallen much more sharply than the production costs. The University of Illinois calculated that on highly productive farms in Central Illinois, after deducting all costs including land rent, there is a negative margin left for the farmer. For 2024, the university expects a net income after deducting direct costs and overhead but excluding land costs of $250 per acre of corn. After deducting land rent at $359, the farmer is left with a negative margin of just under $110 per acre. For comparison: in 2022, the net income for an acre of corn was $690 before deducting land rent and $332 after. In the preliminary figures for 2023, there is a negative margin after deducting all costs including land rent of $164 per acre. The good results of 2022 are dwindling after two years.
Starting next week, the summer schedule will be in effect, and the grain analysis will be published once a week. If there are relevant current developments, we will keep you informed in between.
