Nov 27 / Alef Dias

Grains, Oilseeds and Livestock Weekly Report - 2023 11 27

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"Although it's only the beginning of the season, the severe delay in planting and the poor crop conditions in France could already have an irreversible impact on the results of the EU's main producer.
The heavy rains that have fallen in the country in recent weeks have brought wheat sowing to a virtual standstill. France recorded its highest level of rainfall ever for 26 consecutive days, with 215.4 mm between October 18 and November 12. As of last week, French producers had only planted 74% of the expected area vs 98% last year.
Given the much more favorable situation observed in the Black Sea and US crops, this scenario should contribute to the continuation throughout the 24/25 harvest of two trends observed in the second semester: weak French and EU exports due to low competitiveness against Russian wheat; and a strengthening of Euronext wheat vs Chicago."

Wheat: Impact of delayed planting in France

Introduction

With the dormancy period for the 24/25 winter wheat crop approaching in the main producing countries of the Northern Hemisphere, planting data and conditions in these regions are becoming increasingly relevant.

Among these countries, France certainly has the most worrying situation so far. Farmers in the European Union's (EU) main producing country are facing difficulties in planting the 24/25 crop, which could have a significant impact on the wheat markets in the coming months.
Fig. 1: Crop Progress - France (%)

Source: CME

Fig. 2: Accumulated Precipitation - Last 60 days (mm)

Source: Safras

Heavy rains lead to severe planting delays

The heavy rains that have fallen in France in recent weeks have brought wheat sowing to a virtual standstill. Farmers benefited from very favorable sowing conditions at the start of the season, but France recorded its highest level of rainfall ever for 26 consecutive days, with 215.4 mm between October 18 and November 12.

According to the French Ministry of Agriculture, French producers had sown 74% of the soft wheat area expected for next year's harvest by November 20, compared to 71% a week earlier. At the same time last year, planting was almost 98% complete.

In addition to the delay in planting, the heavy rains have also had an impact on the conditions of the crop. The amount of soft wheat in good or excellent condition stood at 83%, down from 86% last week. In the same period in the last two harvests - 23/24 and 22/23 - 98% and 99% of the crop was in good and excellent condition, respectively.
Fig. 3: Crop conditions - France (%)

Source: CME, NYMEX

Fig. 4: Soil Moisture - France (% in 1m of soil)

Source: EPA

The situation should lead to lower area and productivity

The expectation at the start of the harvest was already of a reduction in the area planted in the EU, mainly due to the low price scenario, but the delay in planting should lead to an even greater cut, given that the "ideal" planting window is practically over.

In addition to the smaller seeded area, yield should also be affected. Planting during the ideal period allows the wheat to form a sufficient, but not excessive, number of tillers. Early sowing results in an excessive number of tillers in the fall, which can compete with each other, become diseased, and deplete the soil's moisture, causing grain yields to be low. Late sowing gives the plants little time to develop tillers, resulting in an inadequate number of ears (heads) for a high yield the following spring.
Fig. 5: Soft Wheat Exports - France (M mt)

Source: CME, NYMEX

Fig. 6: Euronext-Chicago Wheat Spread (USD/mt)

Source: EPA

Conclusions

Although it's only the beginning of the crop, the severe delay in planting in France could already have irreversible impacts on the results of the EU's main producer - around 28% on average over the last few crops. First unofficial estimates point to a reduction of up to 8M mt in the bloc's harvest, given that Germany is also facing a similar situation.

Given the more favorable situation observed in the Black Sea crops (Ukraine and Russia) and in the US, this scenario should contribute to the continuation throughout the 24/25 harvest of two trends observed in the second semester: weak French and EU exports due to low competitiveness against Russian wheat; and a strengthening of Euronext wheat against Chicago.

Weekly Report — Grains and Oilseeds

Written by Alef Dias
[email protected]
Reviewed by Pedro Schicchi
[email protected]
www.hedgepointglobal.com

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