Uncertainty continues to dominate the wheat market. Russia has shaken up the market this week. Canceling and later resuming the grain deal is still affecting the market. The biggest decline now seems to be behind us, but the fear is there.
The decline in wheat prices is starting to level off. On the Matif, the December wheat contract yielded €0,50 to close at €340,25 per tonne. On the CBoT, the wheat contract fell 0,7% to $840,50 per bushel (approximately €316 per tonne). Corn and soy also closed lower last trading session by 1,2% and 0,9% respectively.
The current grain deal runs for another three weeks. Russian President Vladimir Putin has stated several times that he is not satisfied with how the current deal is turning out for Russia. The expectation is therefore that the Kremlin will not sign the cross and will want to negotiate new conditions. Surprises cannot be ruled out by analysts in the coming weeks. Putin's U-turn on the grain deal is an example of this.
Power play
The war in Ukraine is certainly not going as the Kremlin intended and Western sanctions are hitting the Russian economy hard. The group of countries that want to maintain good relations with Putin has thinned out significantly in the past eight months. Some dubious regimes in, for example, the Middle East (think of Iran and Syria) continue to support Putin, but they have little weight on the geopolitical playing field. Countries such as China, India and Turkey keep lines of communication open with the Kremlin, but they also largely pursue their own interests.
That relatively small group of countries does not strengthen Putin's position. Some experts have cited the lack of allies as a reason for the sudden resumption of the grain deal. The deal is a prestige project of Turkish President Erdogan. Russia, for example, has become largely dependent on Turkey for natural gas exports and international payments. Erdogan can thus increase the pressure on Russia. That may well have played a major role in Putin's turn last week.
In the US, market agencies StoneX and S&P Global Commodity Insights announced their revised corn yield forecast yesterday. Both have adjusted the expected harvest upwards, which puts some pressure on prices. The USDA is expected to make a similar adjustment in the Wasde report next week. Furthermore, the rise in the dollar is hindering exports and the low water level in the Mississippi is not helping transport. Still, corn and soy export figures this week are reasonably in line with trade expectations. It is notable that the US exported more than 3 million tons of wheat in September. That is the largest export in 9 years. The total wheat exports so far this season are still significantly behind the multi-year average due to very small exports in June and July (the smallest in 51 years).