As unexpectedly as Russia pulled the plug on the grain deal on Saturday, so suddenly the Kremlin announced yesterday that it would rejoin the deal. The consequences for the wheat market are obvious. It took a big hit in the past trading session and closed sharply lower.
The wheat quotation on the Matif yesterday lost €16,50 to close at €341,25 per tonne. That is a significant drop, but the price still remains above the closing price of last Friday, before the unrest about the grain deal came to a temporary peak. On the CBoT, the price of the December wheat contract fell 6,3% to $8,46 per bushel (approximately €319 per tonne). Corn was dragged down along with wheat on the American stock market, losing 1,5%. Soy is the exception in the declining market and showed a small increase and closed 0,3% higher on the CBoT.
According to analysts, the fact that Russia rejoined the grain deal against expectations is the cause of the falling wheat prices on the stock exchanges. Russia claims that commitments have been made from Ukraine that will allow the Kremlin to back the deal. Ukraine has denied in a statement that additional commitments have been made to Russia. “Our state has not entered into any new commitments that go beyond the already existing agreements in the grain deal,” wrote Oleg Nikolenko, spokesperson for the Ukrainian Ministry of Foreign Affairs. According to Nikolenko, Ukraine has never endangered the grain routes and has no plans to use the grain corridors for military purposes. Ukraine has always adhered to the terms of the deal. "Moscow is back on the grain deal thanks to the active diplomacy of UN Secretary General Antonio Guterres and Turkish President Recep Tayyip Erdogan. In consultation with Ukraine, they found words that Putin understood."
The shortage on the wheat market is certainly not over
Players in the grain market are concerned about the capricious policy in the Kremlin. “We should make as much use of the good news as possible while it lasts,” is a common response. The fact that the last word on the grain deal has not yet been said was evident from statements by Russian Foreign Minister Sergei Lavrov. Speaking at a conference in Jordan, Lavrov said Moscow has appealed to the UN to better implement the Russian part of the deal. In other words: Russia wants to export more grain.
It is not only developments in the Black Sea region that are causing unrest on the tight world grain market. In North America, grain growers are struggling with a persistent drought, while Australia is plagued by too much water. The large grain harvest forecast for Australia is in jeopardy due to flooding and excessive rain in recent weeks. Several experts warn about this. The water that has fallen recently in the eastern grain area does not benefit the quality. Hard baking wheat is grown here. Approximately half of this area will probably have to be sold as feed wheat because the protein content decreases due to precipitation. In addition, some of the wheat has been flooded and probably cannot be harvested at all. The floods have also washed away or damaged roads. That is a problem getting the wheat to users or to the ports.