Analysis Grains & Commodities
Rain comes too late for US wheat
The European wheat market continues to struggle. An expensive euro, moderate exports and a relatively large stock; none of this helps to really change the mood on the market. In the area of world trade, Trump is well able to attract attention. In between his quarrel with his former good friend Musk, Trump had a telephone conversation with Chinese President Xi. Europe also made itself heard with regard to the Mercosur trade agreement. According to Agriculture Commissioner Hansen, this could come into effect before the summer.
The September wheat contract on the Matif closed yesterday €0,25 lower at €202,75 per tonne. On the CBoT, grain prices were on the rise. Wheat closed 0,4% higher at $5.45½ per bushel. Corn rose only ¾ cent to $4.39½ per bushel. Soybeans were the biggest gainer on the Chicago exchange, up 0,7% to $10.51¾ per bushel.
In Europe, the grain market is not finding its way up. This is partly due to the relatively favourable and growing weather that we have been enjoying practically since autumn. What also does not help is that farmers and collectors have not been in a hurry to sell the 2024 harvest. Yields were low at the time and many sellers expected that this would lead to a turnaround in the grain market and prices would rise. A real turnaround has not yet occurred, but the low sales pace has ensured that a relatively large amount has remained above the market for a long time. The combination of moderate prices and sufficient stock means that buyers do not feel the need to really commit anything. That also contributes somewhat to the somewhat gloomy mood in the market.
The war premium due to the renewed tension between Russia and Ukraine seems to be building up in Chicago. The effect on the Paris stock exchange is somewhat more limited. A relatively strong euro against the dollar has more effect, according to some analysts. As a result, European exporters are still lagging behind other suppliers.
trade agreement
The Mercosur trade agreement between the EU and several South American countries could be finalised before the summer, EU Agriculture Commissioner Christophe Hansen told Reuters yesterday. The European Commission already put its stamp on the trade agreement in December, but it still has to be approved by the Council by member states. That they will simply agree is not yet certain. Several member states, led by France, fear that the free trade agreement could disadvantage European farmers because they are subject to stricter rules than their colleagues in South America. France has already proposed including an emergency brake in the package. If a sudden large import of a product disrupts the domestic market, imports should be temporarily halted. Such a clause would have to be renegotiated, but Hansen is not in favour of that.
Trade is and remains a theme for Donald Trump. In between his quarrel with Tesla CEO Musk and a visit by German Chancellor Merz, Trump had a telephone conversation with Chinese President Xi. Trump called it afterwards 'a very good telephone conversation' with very positive conclusions for both countries. Chinese media report that Xi is carefully trying to get Trump away from the trade tariffs. On the financial markets, these reports cautiously conclude that there may soon be reports that negotiations will take place at a high level between the US and China.
Drought dissolves
Back to the grain market. The weather in both China and the US is not entirely cooperating for grain growers. In China, the drought is more in the north of the country around the Yellow River. In the US, the drought has just ended in Kansas and Oklahoma, according to the new drought monitor. The rain of the past week is only less favourable than it seems. Wheat is ripe there, or about ready to thresh, and rain at this stage of the crop actually only does harm. In the cornbelt, it is becoming a bit dry. Nothing to worry about yet, but that could provide some more mood in the coming weeks.
Jurphaas Lugtenburg
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