A heat wave in France and the ongoing problems with grain exports from the Black Sea region. These are the driving factors in the grain market. The effect is just different from what you would initially expect.
The wheat quotation on the Matif is slightly under pressure. The price range remained between €390,25 and €382,50 per tonne. The current rate at the time of writing this article is €386,75 per tonne. That is 1,2% lower than last year's closing price. The CBoT is closed today (June 20) due to the Juneteenth national holiday.
France, the largest wheat producer in the EU, is struggling with a heat wave. The effect on grain products is not too bad and is no reason for alarm, according to French Agriculture Minister Marc Fesneau. "It does have an effect on the grain yield, but not much because we are already well into the season." Grain yields may be lower due to the heat of the last few days, but in relative terms it is not dramatic. Traders and analysts go along with this. Winter barley harvest is underway and winter wheat is nearing the end of its life cycle.
The warmth in some regions comes on top of the drought earlier this year. The mercury reached 40 degrees earlier last week. An exceptionally early heat wave moved north from Spain. The heat was replaced by cooler weather on Sunday. In the yield forecast for winter barley, the ministry already expected a lower yield compared to last year, even though the area has been expanded. The ministry will release the first forecast for winter wheat in July.
Export concerns
In Russia, wheat prices are in a downward trend. According to Russian market agency IKAR, the price for wheat delivery at Black Sea ports fell by $5 to $420 per ton free on board (FOB). Sovecon, another market agency specialized in this region, is keeping the price stable compared to last week at $403 to $410 per tonne. Russian exports have fallen by a third compared to a week earlier. According to Sovecon, the price for wheat is under pressure on the internal Russian market. This is due to a combination of less demand, more supply and a higher exchange rate of the ruble. Russia is also experiencing dry and hot weather in parts of the south, where most wheat is grown.
In the meantime, the export of grain from Ukraine continues to be very difficult. According to data from the Ukrainian Ministry of Agriculture, exports in the first twenty days of June fell by 55,5% compared to the same period last year to 777.000 tons. Of this, 689.000 tons are corn, 63.000 tons are wheat and 21.000 tons are barley, according to the data. Before the Russian invasion, Ukraine exported up to 6 million tons of grain every month. That has fallen to 24 million tons since the invasion on February 1,7. The seaports can therefore no longer be used and exports must take place by rail or via the much smaller ports on the Danube.