Analysis Grains and raw material
War and drought keep a grip on grain market
The grain market remains tense. The uncertainty about the supply of grain from Ukraine is not a certainty, according to analysts due to steps from Russia. Drought continues to occupy the market. The adjustment of the global wheat harvest estimate by the International Grains Council (IGC) did not change market players.
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Choose the subscription that suits youThe September contract for wheat on the Matif rose yesterday by €2,25 to €349,25 per tonne. On the CboT, wheat also recorded a small plus of 0,8% compared to the previous closing price. Corn closed marginally higher by 0,4% on the American stock market. Soya suffered slightly and was 0,3% lower.
Concerns about declining demand for wheat due to setbacks in the economy are being drowned out by market unrest about wheat exports from the Black Sea region. The referendum on joining Russia in the eastern provinces of Ukraine and the partial mobilization in Russia are seen as steps towards a further escalation of the war in Ukraine. This makes the market nervous about the supply of wheat from the Black Sea region and translates into a risk premium on the futures market.
Already behind at the start
Drought problems also continue to concern the market. The Argentine grain exchange lowered its wheat yield forecast on Wednesday due to a lack of rainfall in the main growing areas. In the US, winter wheat is in danger of getting off to a bad start due to the persistent drought in the southern prairie states. In Kansas – the top state for winter wheat production – the area under extreme drought has increased from 42% last week to 53% this week. This means that the new harvest is already starting behind.
Developments that have a depressing effect on prices have little effect on the wheat market. The ICG increased its estimate of global wheat production to 792 million tons for the 2022/2023 season. In the previous estimate, the ICG assumed a total harvest of 778 million tons. The adjustment is largely due to a better harvest in Russia. This may explain why the market has only responded to the adjustment to a limited extent. It was precisely the uncertainty about the export of wheat from the Black Sea region that caused the price rally in recent days. The wheat may be there, but if the wheat cannot be transported or if buyers do not want to do business with Russia, the grain market will not benefit on balance.