Grain quotes on the international exchanges are taking a step back this trading session. The market seems to be cautiously assuming that a solution will be found for the export of grain from Ukraine in time when the current grain deal ends. However, developments in Australia could give the market momentum again. China's soy imports showed a trend break in September, but this is not yet reflected in the current price.
Wheat prices on both the Matif and the CBoT are cautiously under pressure today, Monday, October 24. At the time of writing this article, the prices of wheat contracts on both exchanges are approximately 1% lower compared to the closing price last Friday. The soy quotation on the CBoT is also just under 1% lower than before the weekend. Corn is also in decline, but with a 0,75% lower price the loss remains more limited.
Russia remains a major uncertain factor on the grain market. On Sunday, October 24, the Ukrainian ministry of infrastructure announced that the Ukrainian ports covered by the grain deal are only being used at approximately 25% - 30% of capacity due to Russian trainers. Since August 1, 8,5 million grains have been exported under the deal. In good months before the Russian invasion, up to 6 million tons per month were handled. It is still uncertain whether the current grain deal will be extended. The current agreement expires on November 19 and would need to be extended before then if Ukraine wants to maintain grain exports via the Black Sea. Given the price movement on the wheat market, players seem to more or less assume that exports from Ukraine will continue at least at current levels.
floods
The forecast for Australia's wheat harvest this season is estimated by the USDA at 34 million tonnes. That is 2,3 million tons lower than last season's harvest, but still the second largest harvest ever. However, the growing season in Australia is not going according to the book. In New South Wales, conservative estimates suggest that 120.000 hectares of wheat have been lost to flooding. The damage to affected farmers amounts to approximately 150 million Australian dollars (approximately €100 million) in wheat alone. The farmers' interest groups are therefore asking for support for the affected farmers. Cultivation costs have risen very rapidly and growers have invested a significant amount of capital in their crops. According to the interest groups, extreme precipitation and the flooding that follows can no longer be called a normal business risk.
China is making waves in the soy market. According to the latest customs figures, the Asian country imported 7,72 million tons of soy last September. That is 12% more compared to the same month a year earlier. Perhaps even more important is the trend break with months of disappointing import figures from China. Due to a disappointing harvest in Brazil, the soy price rose to the highest level in ten years in June. This coincided with disappointing results in the pig sector - where soy meal is an important feed raw material - and that makes China, the largest buyer of soy on the world market, cautious.