The grain deal between Russia and Ukraine is rumbling again. The implementing body has suspended inspections of ships en route to Ukraine today because of disagreements about 'priorities'.
The May contract on the Matif closed €1 higher yesterday, reaching €252,25 per tonne. On the CBoT, the May wheat contract gave up 0,7% to close at $6.74 per bushel. Corn was also down, dropping 0,5% to $6.51 per bushel. Soy was in the green figures in Chicago last trading session and rose 0,7% to $14.97¼ per bushel.
The Joint Coordination Center (JCC) is not carrying out inspections of ships traveling to or from Ukraine under the grain deal today (Wednesday, April 12). The organization announced this today. “The parties need more time to reach an agreement on operational priorities,” the JCC said in the message. The JCC brings together Ukraine, Russia, Turkey and the United Nations. As part of the grain deal, all ships to and from Ukraine will be inspected to ensure they are not carrying goods other than grain or fertilizer. According to the JCC, 50 ships are awaiting inspection before they can proceed to Ukraine. The JCC calls on all parties involved to take their responsibility and expects to resume inspections tomorrow.
Although the JCC does not point an accusing finger, analysts assume that Russia is the obstructionist. Last Friday, Sergei Lavrov, the Russian Foreign Minister, announced that the Kremlin is working on an alternative to the current grain deal. Russia is very dissatisfied with how the deal is turning out. In particular, limited access to transport insurance and Russia's connection to the Swift international payment system are important sore points for the Russians. For Ukraine, the importance of grain exports via the ports on the Black Sea is increasing. This is because the EU is increasingly resistant to the import of grain from Ukraine. The land route for Ukrainian grain exports, which runs via Poland, among others, is also coming under fire.
China is making waves in the wheat market
The USDA released the April edition of the Wasde report last night Dutch time. The USDA's accountants have not made any shocking changes for the 2022/2023 season compared to the March edition, but there are a few notable shifts. The amount of wheat available (starting stock plus production) this current season has increased by 0,7 million tons to 1.061,1 million tons. This increase is largely due to an adjustment of the wheat stock in Syria and a larger harvest in Ethiopia. Wheat consumption increased by 2,9 million tons to 796,1 million tons. The amount of wheat traded on the world market amounts to 212,7 million tons, according to the USDA. This is a reduction of 1,2 million tons compared to the previous report and is mainly due to lower exports from the EU, Argentina and Brazil. Additional exports from Russia and Ukraine do not compensate for the exports from these countries.
China is a merchant of wheat. In the Wasde report, the Asian country's imports are increased by 2,0 million tons to 12,0 million tons. That is the largest import since 1995/96, making China the largest wheat importer in the world. China can take this leading position due to, among other things, the large wheat harvest in Australia, which is a major exporter. The global ending stock of wheat has been reduced by 2,1 million tons to 265,1 million tons. That is the smallest stock since the 2015/16 season. The majority of that stock, namely 139,6 million tons, is in the hands of China.
Focus on South America
World production of 'coarse grains' (corn, barley, etc.) has been reduced by 3,0 million tons to 1.144,5 million tons. This is mainly due to disappointing harvests in Europe and South America. Feed consumption has remained the same, but demand for other applications has decreased. The ending stock of 'coarse grains' has been reduced by 1,1 million tons to 295,3 million tons.
With oilseeds, the USDA has mainly made adjustments to yields in South America. For Brazil, the harvest has been increased by 1,0 million tons to 154,0 million tons. The Argentine harvest has been adjusted downwards by 5,5 million tons to 27,0 million tons. World soy production has been reduced by a total of 5,5 million tons compared to the March edition of the Wasde report to 369,6 million tons. Due to lower consumption, the final stock nevertheless increases by 0,3 million tons to 100,3 million tons.
Improving tires
The Wasde report reviewed the relationship between China and Australia, but there is more news about that. Both countries reached an agreement yesterday in a long-running conflict over barley. A few years ago, Australia asked critical questions about the origin and origins of the coronavirus, which did not exactly go down well in Beijing. In response, China imposed anti-dumping duties on Australian barley and wine, among other things. The agreement concluded yesterday is seen by analysts as the next step in the improved relationship between China and Australia. This is less good news for European barley growers. Last season, China accounted for more than a third of EU barley exports with 2,3 million tonnes. Imports are lagging behind in the current season and China only purchased 1,2 million tons of barley from the EU. Analysts expect that the agreement between China and Australia will further weaken the purchasing spirit in the EU.