The grain market pauses after the rally just before the weekend. The trade is weighing up how to factor developments in Russia and Ukraine into the wheat price. On the soybean market, the drought in Argentina has created a very solid base in the market. Argentinian soybean processors are looking to neighboring Brazil for soy, partly due to the high soybean meal prices.
The March wheat contract on the Matif is under some pressure today. At the time of writing, the price is €1,50 lower than the closing price for the weekend. On the CBoT, wheat is down 1%. In maize, the decline is limited to approximately 0,2%. Soy moves mainly sideways with a price change within 0,1%.
Unrest in the Black Sea region caused a revival in the wheat market on both the Matif and the CBoT last Friday. That unrest is not over yet. Today, Russia said it considers it inappropriate to extend the grain deal unless sanctions preventing the export of agricultural goods and a number of other bottlenecks are resolved. The grain deal has been in force since July to allow Ukraine to ship grain again via the ports on the Black Sea. The deal was extended by 120 days in November. This means that a new extension will have to be arranged next month to keep the corridor open. Given Russia's position, that could be quite a challenge. Russia's agricultural and fertilizer industries have been left out of the Western sanctions package. For example, due to the restrictions on payments to and from Russia, logistics and insurance, these sectors in Russia are being hit by the measures that the West has taken against Russia.
Ukrainian exports are lagging behind
Ukrainian grain exports remain almost 29% behind last season. This is evident from the export figures published today by the Ukrainian Ministry of Agriculture. So far, 2022 million tonnes of grain have been exported in the 23/29,2 season. Of this, 10,4 million tons of wheat, 16,7 million tons of corn and 1,9 million tons of barley. At this time last season, the export counter stood at 40,9 million tons of grain. The export in the first twelve days of February is not disappointing at 2,2 million tons if you compare it with the 2,4 million tons last season. It is not surprising that less grain is exported throughout the season, given the war with Russia. In addition to the loss of area due to the Russian occupation, the Ukrainian ports on the Black Sea have also been closed for almost six months. The total harvest in Ukraine in 2022 is estimated by the ministry at 51 million tons. A year earlier, Ukraine harvested a record harvest of 86 million tons.
Soy rose to its highest level in five months last Friday. Drought in Argentina provides a solid foundation for the soy market. The Argentinian soy harvest is therefore a lot smaller. In neighboring Brazil, a top harvest is expected, although rain around the harvest is causing delays. Not only soy is well priced, but soy meal is also relatively expensive and fluctuates around $500 per short ton (approximately $450 per ton). The margin for processing is relatively high and it is therefore interesting for Argentinian processors to import soy from Brazil and press it in their own factories.