Wheat market players are cautiously looking upwards. Wheat prices in Russia are somewhat under pressure due to limited demand from buyers, but the CBoT and Matif are not getting much of that. For maize, but especially for soya, the price is under pressure. According to analysts, this is largely due to developments in Brazil.
The wheat market starts the week on a cautiously positive note. As of press time before market close, the March wheat contract is up $2,50 from its pre-weekend close. On the CBoT, wheat is up by more than 0,5%. Corn remains about the same and soy is down about 0,25%.
Russia expects to export 2022 to 23 million tons of wheat in the second half of the 30/35 grain season. At least that is what the Russian news agency Interfax writes based on statements by the State Secretary for Agriculture. The Russian wheat quotation is now under pressure. Market agency Ikar lowered the quote by $7 to $297 per tonne for delivery to the Black Sea ports. “Wheat demand is stagnating and the world views Russia's wheat supply as endless,” according to Ikar. Yet it is not the case that no wheat leaves Russia. According to Sovecon, 3,8 million tons of wheat were exported by Russia in January. That is well above the multi-year average for this month, which is 2,7 million tons.
Drought threatens to become a problem in the south of Russia for the current growing season. Ikar has therefore adjusted the expected wheat yield for the 2023 harvest downwards from 87 to 84 million tons of wheat. Sovecon keeps the yield forecast unchanged at 86 million tons, but does note that drought in the south of the country threatens to become a serious problem.
Harvest delay
The soy harvest in Brazil is lagging behind last year. Just under 10% of the area has been harvested, according to market agency Partia Agronegocios. At this time last year, more than 20% of the sown area had already been harvested. Safras, another market agency, estimates harvest progress at 8% compared to 17% last year. The multi-year average for this time is 10%, according to Safras. In terms of soy harvest progress in Brazil, it should be noted that the area has grown by 4,7% compared to last season and a record harvest of more than 150 million tons is expected. The rain delays the harvest in Brazil and causes quality problems. Mold, especially rust, strikes the crop. Growers have therefore had to use extra fungicides.
Growers are not in a hurry to sell soy yet. About 30% of Brazilian soy is sold before or during harvest, according to Safras. A slow harvest pace and the hope that prices will rise slightly means that farmers are not in a hurry to sell soy. According to Safras, what also plays a role that should not be underestimated are the unstable political and economic prospects in Brazil. The change of power between Bolsonaro and Lula da Silva has not gone unnoticed and, for example, pushed down the value of the real.