The economic developments do not go unnoticed by the grain market. In combination with grain exports from the Black Sea region, this is pushing prices on the futures markets. However, one of the underlying problems - the tight grain balance for mainly maize and wheat - has not changed. That may have consequences for the new season.
Grain quotations are under some pressure this afternoon (Monday, September 19). The wheat market will suffer the greatest losses. On the Matif, the decline in wheat contracts remains just below 2%. On the CBoT the loss is somewhat greater and for the contracts of the 2022 harvest it is around 2,5%. For soy and corn, losses are limited to a few tenths of a percent.
Concerns about grain exports from Ukraine after Russian President Putin's statements have subsided somewhat. A total of 165 ships carrying 3,7 million tons of grain and other agricultural products have left Ukrainian ports. The third ship under the flag of the UN world food program left on Saturday. This ship left Chernomorsk with 30.000 tons of wheat for Ethiopia.
Interest rate increase
The players in the grain market also keep a close eye on economic developments. This mainly influences the demand development on the grain market. The market is taking into account a significant interest rate increase by the US central bank, the Federal Reserve (Fed). Some analysts are even talking about a 100 basis point rate hike that the Fed may announce this week. The largest group of experts assumes a slightly smaller, but still significant interest rate increase of 75 basis points. The central bank is forced to make a significant increase due to high inflation. Pursuing an aggressive interest rate policy and tighter monetary policy are putting a brake on economic growth. According to economists, this will only reinforce a recession. This in turn makes investors cautious, which has an impact on the raw materials and grains market.
The grain balance remains tight. On average, the wheat harvest in the Northern Hemisphere was not that bad. Corn and soy yields also seem to be not that good in America and Europe. Exchanging corn for wheat for certain applications (for example animal feed) or vice versa is not really an option this season. In that respect, both grains are evenly matched in terms of price.
If we look a little further ahead, it will be interesting what American farmers will do this fall. Do they choose wheat en masse or do they prefer maize? The December 2023 wheat contract closed Friday at $8.82,25 per bushel, almost $0,25 higher than the December 2022 contract, the current contract. The December 2023 corn contract, on the other hand, is more than $0,50 lower on the CBoT compared to the 2022 contract. Looking at the futures market gives the impression that wheat is not that interesting for the American farmer at the current price. The coming months will reveal what consequences this will have for the winter wheat area. This contradiction on the futures market mainly occurs in the US. On the Matif, wheat contracts for the new harvest are around €20 lower.