The grain market shows a mixed picture. Wheat prices took a big step back. Market players seem to be anticipating an extension of the grain deal. Corn and soybean prices actually took a step up due to drought in Argentina.
Wheat prices were under considerable pressure yesterday. On the Matif, the March contract yielded €7,50, which amounted to €287 per tonne. On the CBoT the price fell 2% to $7.50½ per bushel. Corn rallied to close yesterday at a one-week high of $6.80½ a bushel. Soybeans rose 1,5% to $15.48¾ per bushel. That is the highest price in a month.
There are several reasons why wheat prices are under pressure, according to analysts. First of all, there remains uncertainty about the availability of wheat from the Black Sea region. Russian President Putin issued a clear nuclear warning to the West in his annual speech to parliament. However, Putin made no clear statements about a further escalation of the war in eastern Ukraine. Analysts see this as a signal that the grain deal that is to be extended in March could go ahead without many problems and adjustments. The Kremlin also balked at the previous extension in November, but ultimately agreed.
Pressure from Russia
Stiff competition from wheat from the Black Sea region is dampening the mood on the stock exchanges in Paris and Chicago, according to analysts. Russian export data shows that exports have been picking up pace in the past week. American exporters are at an additional disadvantage due to the relatively high dollar exchange rate. Weekly US wheat exports of 373.000 tonnes fell neatly within the range of 300.000 to 525.000 forecast by market analysts. A winter storm is forecast in the US later this week, bringing an insulating blanket of snow to the northern Prairies and Midwest. The precipitation only passes by the drought-stricken southern prairies, the winter wheat belt of the US.
Drought, but in Argentina, further pushed up corn and soy prices last trading session. There is once again no significant rain in the weather forecast for Argentina for the next ten days. Drought stress continues to affect crops there. The Rosario grain exchange expects that corn exports in the period March to June will be 40% lower than the same period a year earlier. Argentina is one of the largest soy and corn producers in the world and a major exporter of soy meal and soy oil.
Extreme heat in India
High grain prices are a concern for the Indian government. Last month, 3 million tonnes of wheat from the intervention stock was put on the market to cool the market after wheat on the domestic market reached a record high. Yesterday it was announced that an additional 2 million tons of wheat will be brought onto the market. India appeared to be heading for a large wheat harvest this season due to an expansion in acreage and favorable growing conditions. However, there is no longer any growing weather. This week the mercury rose to 39 degrees Celsius in some places. The wheat in India is or is about to blossom and will quickly fill the grain. The extreme heat will almost certainly cost yields in this critical period, according to analysts.