Wheat unimpressed by Russian objections

The May contract on the Matif yesterday continued the downward trend that started this week, losing €3,75 to close at €263,50 per tonne. On the CBoT, the May wheat contract took an even bigger plunge, losing 3,2% to settle at $6.65¾ per bushel. That is the lowest quotation in eighteen months. Corn lost less ground than wheat, but with a decline of 2,2% it still made a big difference. The May corn contract on the Chicago exchange therefore amounts to $6.11½ per bushel. Soya also lost some, but here the loss is limited to 0,5%.

The disappointing demand for wheat from the US dampens the mood on the wheat market. Russia is the price fighter on the market and is steadily lowering prices in both Paris and Chicago. The market therefore seems to more or less assume that the current grain deal between Russia and Ukraine will be extended before the deal line next Sunday. Russian Foreign Minister Lavrov is no longer taken seriously by players in the wheat market. Lavrov explained at a press conference yesterday that the current grain deal can be divided into two parts, namely facilitating the safe export of grain from Ukraine and breaking down barriers to Russian grain exports. Those two parts are inextricably linked, according to Lavrov. "The first part is being properly implemented and we are fulfilling our obligations in this area together with our Turkish colleagues. The second part is not being implemented at all. When we talk about the deal, it is about the total package. You can only extend what has already been implemented If only half of that total package is implemented, the discussion about extension is extremely complicated."

Several analysts point out that Lavrov's criticism does not exactly do justice to Russia's position on the grain market. The country still manages to ship significant volumes. Earlier this week, Russia's Agriculture Minister was quoted by the Kommersant business newspaper as saying that the country is on track to export 55 to 60 million tons of grain during the season. In that sense, it is not surprising that the market has practically not responded to Lavrov's statements.

Change in the weather
In the short term, drought in North America will continue to play a role. In the areas where the focus is traditionally on corn, there is no precipitation shortage, but on the prairies where a lot of wheat is grown, there will not be enough precipitation this winter to solve the moisture problems.

For the longer term, weather patterns appear to be changing. A La Niña year for a fourth year in a row does not seem likely. The Japan Meteorological Institute calculated a 70% chance that things will return to a normal pattern. The chance of an El Niño increases at the same time, which is generally more favorable for agriculture in America. Combined with an expected expansion of the corn area, this dampens the mood in the corn trade. Brazil's statistical office also released new figures in which it revised upwards the expected yield of corn in the country. In Argentina, the Buenos Aires stock exchange has once again adjusted its revenue forecast downwards. In the previous forecast, the stock exchange's analysts assumed a total harvest of 33,5 million tons, which has been reduced by 4,5 million tons to 29 million tons.