The wheat market is once again in a downward trend. A relatively large supply of cheap wheat from Russia acts as a lid on the market, although exports from Ukraine remain a major uncertain factor. Soy and corn move sideways. Players have difficulty assessing developments in South America.
The March wheat contract on the Matif gave up €2,75 yesterday to close at €293,75 per tonne. Wheat prices also fell 0,6% on the CBoT to $7.65 per bushel. Corn moved virtually sideways on the US stock market, closing the smallest possible increment ($0.25) lower at $6.76 per bushel. The soy price also barely budged and amounted to $15.26½ per bushel.
Whether or not to extend the grain deal that should happen next month remains a major uncertain factor on the wheat market. Next week marks one year since Russian troops crossed the Ukrainian border and with a possible new upsurge in violence surrounding this macabre anniversary, the grain deal could collapse. According to analysts, it is difficult to estimate what the consequences will be for physical trade. Russia has a generous wheat supply after a good harvest last season. That large stock is keeping the lid on the market at the moment.
However, Russia is having difficulty finding buyers for that grain. The grain and fertilizer trade has been excluded from Western sanctions, but shipowners are cautious about carrying out orders for Russian customers and banks hardly dare to handle payment transactions to and from Russia for fear of unknowingly violating Western sanctions. Due to the war in Ukraine, several major buyers of Russian wheat are shocked by the consequences of being dependent on one supplier for a large part of their food supply. Egypt, for example, is therefore frantically trying to diversify its suppliers. However, that is not very successful in the current market.
Strong physical odds
This image that the supply on the physical market is not yet sufficient is also reflected in a certain sense at the Dutch regional fairs. The quotation for feed wheat in Rotterdam this week is €308 per tonne. That is the price that buyers pay for wheat. The other quotations are the grower prices and these are logically somewhat lower since a grower usually supplies to the processor through intermediaries.
In the soy and corn trade, it is South America that counts. But here too, traders and analysts have difficulty valuing the conflicting developments and pricing them in the market. A large harvest is expected for Brazil, which will have a price-dampening effect. However, the harvest is not going so well due to showers, which in turn has consequences for the quality and yield of soy and the potential yield of the subsequent crop of maize that is sown after soy in Brazil. Market agency AgRural lowered the expected soy harvest in Brazil by 2 million tons to 150,9 million tons. That is still a record by the way. For Argentina, the Buenos Aires grain exchange further reduced its yield forecast this week to 38 million tons. Argentina is experiencing its driest season in sixty years. According to the Buenos Aires grain exchange, an icy polar wind is now blowing, bringing the mercury to far below normal temperatures for this time of year, locally even with frost on the ground.