Grain quotes on the CBoT and Matif are under some pressure. According to analysts, rain in parts of the southern prairies in the US and doubts about demand from China are weighing down the mood in the market. In Ukraine, storage for the new harvest threatens to become a major problem.
The wheat quotation on the Matif took a big step back yesterday (May 3): by €12,25 to €390,75 per tonne. This moves the old crop to the first contract for the new crop, which was concluded at €377,25 per tonne. It should be noted that on the May 2022 contract, 12.280 positions are open against 175.453 on the September contract. Due to the limited number of open positions, the price becomes more sensitive to significant price movements.
The contracts for the new harvest remain stable. The September contract yielded €0,25, the December contract equalized at €371,25 per tonne, March 2023 plus €0,25 and May 2023 rose €0,50 to €365,25 per tonne. On the CBoT, trading in the May contract is almost complete with 561 open positions. The July contract closed nearly 1% lower last trading session at $1045,50 per bushel (around $365 per tonne). Maize and soya lost 1,5% and 0,8% respectively compared to the previous closing price.
The foundation under the current relatively high grain prices is solid, according to analysts. The weather in key growing regions in the US, India and Brazil is not cooperating for top yields. For Brazil, some market agencies have reduced the yield for the progeny of maize after soybeans due to persistent drought. On the other hand, experts expect China to export less grain. Parts of the country are in lockdown due to corona outbreaks. This has major consequences for economic expectations and indirectly also for the demand for grains.
Too little storage
The problems in the Black Sea area are also far from over. According to the APK-Inform market agency, there is a serious shortage of storage capacity for grain from the new harvest. According to the agency, Ukraine can only export 45,5 million tons of grain from the record 2021 harvest of 86 million tons. The closing stock then amounts to 21,3 million tons. That is 4,2 times as much as the closing stock last season. According to APK-Inform, too much wheat remains to make enough space in the silos for the new harvest.
According to Ukrainian government data, there is storage capacity for 75 million tons of grain, of which 44,5 million are owned by agricultural companies. Part of that capacity is in the war zone, effectively leaving 61 million tons. APK expects a yield of 55,9 million tons of grain and oilseeds. This could potentially result in no storage available for 16,3 million tonnes. In practice, this can be even greater, because the progress of sowing is going relatively well and the weather conditions are also favorable for the growth of the crops.