Wheat and corn continue to make strides on both the European and US stock exchanges. Optimism about increased demand for biodiesel adds an extra dimension to the already tense grain market, according to analysts.
The wheat May contract closed yesterday on the Matif at €399,25 per tonne. The contracts for the new harvest also maintain the upward trend. The September contract closed at €370,25 and the May 2023 contract did €360 per tonne. On the CBoT, the wheat price rose 2,1% to $1103,75 per bushel (approximately €374 per tonne). Corn increased by 1,5% to reach $776,25 per bushel (about €282 per tonne). That is the highest price in a month.
The war in Ukraine and the drought in the US are laying a solid foundation for the grain market at the moment. The US government took it a step further yesterday with plans for additional biofuel. Biden wants to encourage Americans to fuel extra biofuel in the period from June 1 to September 15. He wants to do this, among other things, by stimulating the demand for E15 petrol (with 15% bio ethanol). According to analysts, this is an emergency measure to regain some control over the relatively high oil prices and associated inflation. In any case, the high inflation acts as an incentive for the grain market. Commodities in a broad sense are seen by investors as a relatively safe means of hedging against inflation.
A strike by transport operators in Argentina is causing problems for the export of grains in the Latin American country. The work stoppage comes at a most inopportune time of the year. The soy processors are running at full speed to produce soy meal and oil. That is now in danger of coming to a halt. Argentina is a major player on the world market for (processed) soya and maize, and this strike is causing extra tension in the market.
Is India the sleeping giant?
The Egyptian state purchasing agency GASC is considering adding India as a trusted country for grain imports. A delegation from Egypt's Ministry of Agriculture has "initiated an investigation into phytosanitary measures and quality of Indian grains in preparation for India's recognition as a trusted country for wheat imports," the supply ministry told Reuters. Egypt is looking for additional suppliers to compensate for the (partial) loss of wheat from Russia and Ukraine. India is regularly mentioned as a country where there is still a lot of potential for additional exports. Several analysts do have critical comments on this. According to USDA figures, the US, EU, Canada and Australia will account for 2021% percent of world wheat exports in the 2022/49 season, despite poor harvests in three of these four. Russia, Ukraine and Kazakhstan account for 29%. The subcontinent of India follows closely behind with a share of 4% of the world market. Additional exports from India will help reduce deficits, but analysts warn not to overestimate that effect.