Grain market players are off to a slow start this week. A cautious equilibrium has emerged after a very volatile week. However, much uncertainty remains. The problems with grain exports from the Black Sea region and the flooding in Australia are causing unrest in the supply side. On the demand side, it is China that has been questioned, especially with regard to the country's strict corona policy.
The grain market started the week with a small decline. On both the Matif and the CBoT, wheat prices were down 0,3% and 0,4% respectively at the time of writing. Soy and corn also showed a similar decline. The bears are thus cautiously gaining the upper hand in the grain market.
Russia shook up the wheat market last week by first deciding to withdraw from the grain deal with Ukraine and then just as easily withdrawing that decision a few days later. The original purpose is becoming increasingly clear. The country wants to further increase its own grain exports. Today, Monday, November 7, Reuters announced, based on four sources, that Russia wants Western sanctions against the state-owned bank Rosselkhozbank to be relaxed. This bank plays a major role in financing agriculture in Russia and is of great importance for wheat exports.
Slow exports
Ukrainian grain exports are now lagging behind last season. Ministry of Agriculture data shows that 14,3 million tonnes of grain have been exported so far this season. Last season the counter stood at 20,6 million tons. This means that exports are lagging behind by more than 30%. It should be noted that Ukraine harvested a very large harvest last season, while this year the yield is disappointing. This is partly because part of the agricultural land is occupied by Russia, but also because of other problems caused by the war such as shortages of fuel and fertilizer.
Drought
In the Southern Hemisphere there is the weather phenomenon La Niña that causes problems. In Argentina, soy sowing is lagging behind, the Rosario grain exchange announced on Friday. In recent years (we now have the third La Niña in a row), the drought caused by La Niña has made farmers wait for significant precipitation to fall. Wheat yields are also likely to be much lower due to drought in Argentina. The overall trend is that Argentine farmers are cautious about investing in crops. Due to the drought, growers think this is too great a risk. This could continue to have an effect for a long time, some analysts warn.
In Australia, La Niña is responsible for above-average precipitation. This can be good for yields, provided there is not too much rain. Australia was heading for top wheat yields, but those expectations are being lowered by flooding in the east of the country. A large part of the area cannot be harvested because it is flooded and on a large part of the area the excessive rainfall during ripening causes a loss of quality of the wheat. That wheat is not wasted, but must be incorporated into animal feed instead of being sold as baking wheat.