What’s moving markets this week? Grain market daily

• Old crop (May-23) UK feed wheat futures closed at £222.50/t yesterday, down £1.50/t from Monday’s close. New crop (Nov-23) futures closed at £224.50/t, down £0.25/t over the same period.
• UK and Paris wheat markets were pressured yesterday by growing optimism over the extension of the Black Sea grain corridor. Chicago wheat futures recorded small gains despite the Black Sea pressure, as US crop conditions come under question – read more about this week’s market movers in today's main section.
• Paris rapeseed futures (May-23), closed at €519.50/t yesterday, down €10.25/t from Monday’s close, following downward movements in soyabean and crude oil markets.

Increased optimism over the extension of the Ukraine export corridor has been pressuring wheat markets this week. This is despite some support from US weather worries as the winter wheat crop may have been impacted by extreme cold/dry conditions. Markets are also positioning ahead of this afternoons USDA World Agricultural Supply and Demand Estimates (WASDE).

Export corridor extension pressure

The Ukraine export corridor deal or the Black Sea Initiative, is due to expire in just 11 days. Its been reported that wheat markets are now pricing in an extension of the deal, which has been weighing on wheat markets globally for some days now (Refinitiv). Today, the UN Secretary General, is due to meet with Ukraine’s President Zelenskiy to discuss a further extension of the Black Sea Initiative. As discussions continue over the next week or so, we could see some volatility in wheat markets. While Russia have signalled, they are ‘not happy’ with some aspects of the deal, as it stands now, it is looking likely that the deal will be extended in some form or another. This will obviously remain a key watch point for markets over the coming days.

US crop conditions under threat

Persistent drought across the US plains has impacted crop conditions in Kansas, the US’ top wheat producing state. As at 5 March, 17% of the winter wheat crop planted in Kansas was rated as good/excellent, this is down from 19% on 26 February, according to latest USDA data.

According to US drought monitor data (as at 28 Feb), 87% of the winter wheat area in Kansas is in drought, with 45% in exceptional drought. Its also estimated that 54% of the total US winter wheat area is located in some form of drought. Putting this into perspective though, this time last year 73% of the national area was located in drought. Over the coming week, rains across parts of the US wheat belt are expected, which may alleviate some concerns. Weekly national US crop progress reporting is due to start again in April, which will allow us to access fully what condition the US wheat crop is in following the persistent cold dry weather.

What is important to note about the US wheat crop this year is that the planted area is provisionally projected to be up 11% on the year, at the highest level in eight years. Therefore, while the recent extreme conditions could have impacted crop conditions and potentially end yields, the rise in area planted may add somewhat of a buffer.

Today’s WASDE

At 17:00 (GMT) the USDA will release its latest WASDE. Yet again, the main focus ahead of the release is on South American output, following the continuing drought in Argentina. Analysts are expecting further cuts to both Argentinian maize and soyabean production estimates (Refinitiv). That said, Brazil is still expected to have record output, which could outweigh the Argentinian loses (Refinitiv). As always, if the WASDE release has any ‘surprises’ or differs from pre report expectations than we could see some short-term market volatility.  

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