The wheat market is dominated by developments in the Black Sea region. There is a dispute about whether and how the grain corridor can be kept open. Around noon on Wednesday it became clear that Russia agrees to continue the grain deal. There are also problems with transport on the maize and - even more so - on the soy market. Brazil is the problem here.
Wheat prices took another step higher last trading session. On the Matif, the December contract rose by €5,50 to €357,75 per tonne. This means that the price remains below the peak of October 10, when the Paris stock exchange closed at €364,25 per tonne. In Chicago, the December wheat contract closed 2,3% higher at €9.02,50 per bushel (approximately €335 per tonne). Corn closed 1% higher on the CBoT at $6.97,75 per bushel (approximately €278 per tonne). The price of soy was 2% higher on the American stock exchange.
The export of grain from Ukraine via the Black Sea appeared to become problematic after Russia withdrew from the grain deal. Broad solutions have been found for the ships that were already on their way to and from Ukraine. Turkey and the UN play an important role in this. It is difficult to organize new transports. According to Ukrainian President Zelensky, there must be a reliable and long-term initiative for the security of the grain corridor. “Russia must make it clear that strict action will be taken against any step the country takes aimed at disrupting world food supplies,” Zelensky said in a video address yesterday (Tuesday, November 2).
Diplomacy
Turkey and the UN have tried in recent days to get Russian President Vladimir Putin back behind the grain deal. Putin informed Turkish President Tayip Recip Erdogan in a telephone conversation yesterday that Russia will only consider resuming the deal after the investigation in Crimea and the naval port in Sevastopol has been completed. The Turkish Foreign Minister said he is optimistic about an early resumption of the grain deal after two telephone conversations with his Russian counterpart. For Turkey, the conclusion of the grain deal had almost become a prestige project. According to some analysts, Turkey sees the collapse of the deal as a loss of face. The optimism that Turkey is now trying to radiate was therefore taken with a grain of salt by several analysts.
But this optimism appears to be justified. Reuters reported late Wednesday morning that Russia agreed to continue the grain deal. The news service bases this on a statement from the Russian Ministry of Defense, which indicates that it has received written guarantees from Kiev not to use the Black Sea grain corridor for military operations against Russia. “The Russian Federation considers that the guarantees received at this time appear sufficient and resumes the implementation of the agreement,” the statement said.
Protests in Brazil
Logistical challenges are not only impacting the grain market in Ukraine. In Brazil, protests by supporters of incumbent President Bolsonaro are causing unrest on the market. Part of Bolsonaro's supporters have not yet accepted Lula da Silva's election win and blocked highways. Transport operators and farmers, among others, are among the groups that have benefited from Bolsonaro's policies, with, for example, lower fuel taxes and soft policies regarding nature conservation and protection of indigenous peoples. Bolsonaro's supporters doubt whether the elections were completely fair and have blocked several highways in protest. Mato Grosso, the largest grain producing state, is one of the hardest hit with 25 blockades. It is not only grain exports that have been seriously disrupted by the blockages. The meat sector has also suffered damage and fuel distribution has run into problems.
Bolsonaro, who initially kept a studious silence after Sunday's elections, announced on Tuesday afternoon local time that he would cooperate in the transfer of power to Lula da Silva. According to the president, the protests are an expression of the dissatisfaction in Brazil about the electoral process. Bolsonaro called on participants in the protests not to cause destruction, but did not call for a complete stop with the protests.