The shortage on the grain market is not over yet. The loss of supply from Ukraine means that buyers are looking for other suppliers. Europe is a serious alternative for more and more importers. Furthermore, the shortage is causing high food prices and, even worse, possible shortages. To alleviate that and to get the grain from Ukraine still on the world market, US President Biden came up with a plan for temporary silos at the border.
On the Matif, wheat prices moved mostly sideways. The September contract made a small correction down €2,25 to a closing price of €392,25 per tonne. The wheat quote on the CBoT is making a bigger move down. Wheat contracts in Chicago fell just under 2% from a day earlier.
The wheat market remains tight. There is consensus among experts on this. This puts a solid foundation in the grain market. High inflation - and its implications for global economic growth - are making investors nervous. This effect is already noticeable on the stock exchanges and on some commodity markets. The grain markets are also most likely not immune to this, according to some analysts. The relatively high exchange rate of the dollar also puts American exports behind. These concerns have prevailed among traders on the CBoT over the past trading session, according to some experts.
Transportation
To alleviate the shortage in the grain market, US President Joe Biden announced yesterday that he wants to build temporary silos along the border of Ukraine. Due to the blockade of the ports on the Black Sea, there is 20 million tons of grain in Ukraine that cannot leave the country. The White House is working on a plan to get the grain out of Ukraine by rail. Because trains run on a different track gauge in Ukraine and the EU, the trains have to be transhipped at the border. "I am working closely with our European partners to bring 20 million tons of grain to the Ukrainian market in order to lower food prices," Biden said at a convention in Philadelphia yesterday. His solution is to build a temporary silo on the border of Ukraine and in Poland in the short term. From there, the grain can be loaded into European wagons to be transported to the ports and thus still on the world market.
Competition
The problems with the export of grain from Ukraine will certainly last for a few more years, analysts expect. Various sources speak of at least three seasons. Countries that are partly dependent on grain from Ukraine are therefore diligently looking for other suppliers. Due to its location, Australia is a logical choice for Asian buyers. In addition, Australia also had a record harvest last season. The yield prospects for the new harvest are also good. However, there is a limit to the amount of wheat Australian ports can handle. According to a source, the grain elevators are fully booked until September. That is why Asian buyers are turning their attention to France and Romania. The price of wheat from France and Romania, including costs for transport to Indonesia for delivery in August, is already close to or even below the price for Australian wheat.