The relatively high grain prices pose different challenges to different countries. India is trying to dampen prices to contain inflation, while Brazil's trade surplus benefits from high prices.
The European wheat market started quietly during the first trading day of 2023. The March wheat contract on the Matif closed at €309,25 per tonne. That is the same as the close on the last trading day of 2022. The CBoT was closed yesterday and will not open until later today Dutch time for the first trading day of 2023.
India is trying to dampen high grain prices to control inflation in the country. The Indian government is considering bringing 2,1 million tonnes of wheat from intervention stock onto the market to drive down prices. The Reuters news agency reported this today based on government sources. The final decision on the sale of the intervention stock will be made in the next 10 days. Food prices play a huge role in controlling inflation in India, Asia's third largest economy. Food accounts for almost 40% of the basket of products on which consumer inflation is based.
Drought in Argentina remains an important factor, especially on the soy market. That doesn't seem to be changing. According to the weather models, it will remain warm and dry in Argentina for the next ten days. This creates a solid foundation for the soy market.
Trade surplus
The relatively high grain prices have done Brazil no harm. The country's trade balance surplus in South America rose to $62,3 billion, according to figures published by the government yesterday. That is the highest surplus on the trade balance since 1989, when these data began to be kept. The value of exported soy in 2022 rose 20,8% to $46,7 billion. This increase is largely due to the higher price and not so much to a larger exported volume.
Politics also plays a role in the grain market. That role is sometimes underestimated by some analysts. A country that is very aware of food security is China. In that country, a new joint venture between state grain trading company COFCO and state storage company Sinograin started this year. The cooperation is part of Beijing's policy to improve the efficiency of national reserves and better guarantee food security. COFCO says it has a processing capacity of 27 million tons and a port capacity of 33 million tons. The company is expected to have a turnover of $48 billion in 2022 and have traded 130 million tons of grain and related products.