The international grain market shares in the fear of the corona virus. Prices are greatly affected by it. On Monday, March 3, the stock markets will once again be in the red. The demand for European wheat remains stable.
Stock market traders fear the consequences of the coronavirus. Leading commodities (such as precious metals) have fallen sharply. This is often an indicator for the entire economy. The damage to the global economy is now estimated at $160 billion.
Question from China
After a high of €198,25 for the March contract on the Matif on January 21, wheat traded at €3 per tonne on February 190. The CBoT is also in a negative spiral. There the rate went from $213,66 to $203,46 per tonne. In addition to the coronavirus, Americans are dealing with another important issue. After signing the Phase-1 deal, the market is waiting for this agreement to materialize. Given the lackluster demand for raw materials from China, the question is how eager state buyers are. They prefer to let world trade do its work, with possible lower prices (for soy) in their sights.
In the meantime, the physical market in Europe is still going well. In a final tender round from the Egyptian state buyer GASC, it won all deals. This left wheat from the Black Sea region behind. Loadings conspicuously take place from Dunkirk, where Glencore has a terminal. Earlier this season, prolonged strikes in France caused supply problems. The French therefore still have a full order book to process.
Green winter
In Russia, the wheat price has fallen for the first time since November. Due to the self-confidence of sellers (thanks to their favorable financial position), arable farmers were reluctant to sell. The domestic market is also starting to demand more, which is causing trade to loosen. The Black Sea region (Russia, Ukraine) is also experiencing a very mild winter with regular rain. This is beneficial for crop growth. This makes the grain extra sensitive to a late frost period, should it occur. This fear is also present in Europe, but does not influence the market. If it remains soft, the bet is on a record wheat harvest in Russia. Partly due to the larger area of wheat.
There is also talk of records in South America, but for soybeans. Sufficient rain fell in Brazil, which has resulted in a positive adjustment of expectations for their soy harvest. A full global market - with declining (Chinese) demand - cannot process this news well. The South American trade expects that China will continue to choose this country over the Americans because of lower prices. A strong dollar is detrimental to American exports. Farmers in the US are reluctant to make offers. After the Phase-1 deal with China, they are hoping for a revival.
Physical Market
Due to the few sales, the physical market in the US is strong. Corn for ethanol production is in demand and quality product is not sufficiently available after the wet autumn. That drives up prices in the eastern part of the corn belt. Ultimately, 6,5 million hectares in the US were not sown due to the wet spring. This area will - in a normal spring - be fully sown this season. That gives the market a negative feeling. An excessively large corn area is expected.
Arable farmers have their backs against the wall. Corn offers little perspective, but there are also warnings not to sow more soy. In 2019, the area already decreased by almost 250.000 hectares. The only crop left is spring wheat, but corn is still preferred. The area also increased in 2019.