Worries about the war in Ukraine continue to grip the market. A possible affiliation of parts of Ukraine with Russia further fueled concerns about grain exports last trade session. Drought also continues to be a problem on the grain market. This already puts the wheat harvest for 2023 at a disadvantage.
Wheat quotes on the Matif and the CBoT have taken a step upwards in the last trading session. The December wheat contract on the Matif closed at €353,75 per tonne. That is €5,25 higher than the day before and the highest price since the beginning of July. On the CBoT, wheat rose 3,6% to 9.03,25 per bushel (approximately €344 per tonne). In corn and soy the increase was limited to 0,4% and 0,1% respectively.
Developments in the Black Sea region continue to leave a strong mark on the wheat market. Russia is expected to take short-term steps to annex Ukraine's eastern provinces following overwhelming support for joining in the referendum. Kiev and the West call it illegal sham referendums that were held at gunpoint. There are fears that the war in Ukraine could get further out of hand and that grain exports will be in trouble.
The Danube remains an important route for grain exports from Ukraine. This is what Ion Stanciu, CEO of TTS Logistics, said in an interview with Reuters. TTS has a fleet of barges sailing in the Danube with a total capacity of 800.000 tons. The company also has grain silos with a capacity of 110.000 in Constanta. Since the start of the war, TTS has transported almost 1 million tons of goods from Ukraine, according to Stanciu. That is just under half of the goods exported via the Danube.
Bad start
Drought remains another important factor in the grain market. In the southern prairie states in the US, winter wheat sowing has been hampered by persistent drought. As a result, wheat is already starting to lag behind, according to several analysts. In the already tight grain market, this makes some players nervous.
It is also dry in South America. The Buenos Aires grain exchange warned yesterday (Wednesday, September 28) that the wheat harvest could be significantly lower as a result. According to the stock exchange's forecast, the Argentine wheat harvest will amount to 17,5 million tons. That is 22% lower than last season's harvest. A large soy harvest is expected for the coming season. The fair assumes a yield of 2022 million tons of soy for the 2023/48 season. That is an increase of almost 16% compared to last season. This growth is mainly due to an expansion of the area. This is at the expense of other crops, mainly maize. The yield of this amounts to 50 million tons. Last season that was 52 million tons.
According to various weather services, the La Niña weather phenomenon will last until early 2023. This causes drought in South America and is one of the reasons for lower yields in Argentina. A bright spot for Argentine farmers is that significant rain has been forecast for October in the country's main growing areas.