The grain market is down this trading day. The maize and soybean prices on the CBoT are particularly affected. The wheat market is different. Not that there is no fear of lower demand in the face of economic setbacks. For wheat, traders are also looking closely at developments in the Black Sea area.
The wheat quotation on the Matif is down 0,5% at €296 per ton at the time of writing this article. On the CBoT, the March contract is 1,4% lower after earlier today the market was just above the level of Friday's closing price. Soy and corn are both down about 1% on the Chicago stock exchange.
Several analysts attribute the lower grain prices to moderate economic prospects. The aggressive interest rate policy of central banks to combat inflation is seen as a driver of a global recession. This in turn has a dampening effect on the demand for raw materials and therefore also on the grain market.
Unpredictable Russia
The wheat market found support in particular on the CBoT due to the unrest caused by Russia. Russia launched an attack on critical infrastructure in the Ukrainian city of Kiev with drones. Russian President Putin himself is on his way to Belarus for a meeting with his counterpart Lukashenko. This is the first time since 2019. According to the Kremlin, the leaders will discuss economic cooperation and security. However, Putin's visit to Lukashenko also fuels speculation that Russia is pressuring the former Soviet ally to cooperate in opening a new front in Ukraine.
Prices for wheat from the Black Sea region took another step back last week. Market agency IKAR lowered the price by $2 to $312 per tonne for wheat FOB delivery in late December early January. Sovecon lowered the price of wheat for direct delivery to $308 to $312 per tonne. A week earlier that was still $312 to $316 per ton. Due to low water levels and ice formation in the Sea of Azov and storms in the Black Sea, wheat exports from Russia are being delayed.
Growth of European crop
For the EU, Coceral, the European trade association of grain traders, expects a larger harvest in 2023 compared to a year earlier. According to Coceral, the area of grains has grown by 1,2% to 51 million hectares. The European grain yield has even increased by 8% to 282 million tons. Last season, a large part of the EU suffered from drought, which resulted in lower yields. It is therefore easy to explain why Coceral calculates a higher yield. The winter grains were generally sown under good conditions and last week's cold appears to have caused little to no damage across Europe. But, several analysts warn, it is very early to make statements about grain yields for next summer. In the US, there is some concern among analysts about a cold front stretching across large parts of the Prairies. This could lead to wintering out in areas where hardly any snow has fallen.
View the overview of grain prices and the technical analysis here.