Grain market players are struggling to keep up with all the developments around, for example, the Black Sea region and crop progress in the US. Last week, Putin took a big step up, especially in the wheat market. Now players seem to be more or less taking stock and the price is going to move sideways.
The wheat quotations on both the Matif and the CBoT are under some pressure today while writing this article. The correction in the wheat price that started on Friday appears to be continuing today (September 26). Opinions differ among analysts about the reason for the lower prices.
Economy
According to several specialists, a recession seems inevitable due to a combination of high inflation, coupled with aggressive monetary policy by major central banks, with the Fed in the lead. It is expected that the raw materials market will not be spared anything. This will most likely have consequences for the demand for grains. This may therefore be lower.
Another point of concern - specific to the American export position - is the high exchange rate of the dollar. American products, including grains, are therefore relatively expensive for buyers on the world market. Furthermore, the weather during the corn and soy harvest also plays a role in the mood on the market in America. The dry weather has not been favorable for growth, but it has a positive effect on the progress of the harvest. That adds some extra pressure.
Russia
In the EU, the provisional harvest figures from Russia put some pressure on the market. Some analysts expect Russia's total wheat harvest for the 2022 crop year to be around 100 million tons. An important part of this is exported and therefore ends up on the world market. Russian wheat is an important competitor to EU wheat due to its geographical location. A buyer from the Middle East or North Africa can choose from both suppliers without many logistical problems.
The tight grain supply continues to form a solid floor in the market. According to figures from the International Grains Council, requested by the Reuters news agency, there will be 2022 days of corn left at the end of the 2023/80 season. That is a decrease of 28% compared to last season and the smallest stock since the 2010/2011 season. That season coincided with the Arab Spring. Lots of areas - for example; the US, EU, China and Argentina - were or are experiencing drought. That has cut into revenues considerably. The war in Ukraine is often pointed to as the cause of the high grain prices. That of course plays an important role, but it does not negate the effect that production can barely keep up with demand.