The grain deal remains a thorny issue on the grain market. Nevertheless, something is changing. Russia has a clear self-interest and it seems it will continue to use the grain deal for that purpose. In the meantime, less value is attached to the firm language from the Kremlin in the market. Ukraine, meanwhile, is being clamped down by the EU, the local farmers' union fears. In Brazil, farmers are rowing against the declining trend in the grain market, whether or not supported by a top yield.
The May contract for wheat on the Matif yesterday yielded €1,25, closing at €251 per tonne. In America, grain prices were on the rise last trading session. Wheat gained 0,8% on the CBoT to $6.79½ per bushel. Corn also traded 0,8% higher to $6.56 per bushel. Soybean gains were slightly more muted at 0,5%, closing at $15.04¼ per bushel.
Russia continues to stir people's minds. Yesterday, inspections of ships sailing under the grain deal were halted for a day due to disagreements over 'priorities', as the Joint Coordination Center (JCC) diplomatically described it. It is widely believed among analysts that Russia is responsible for the brief pause. Inspections have now resumed. The Kremlin is sowing doubt about extending the grain deal after May 18. "An agreement cannot stand on one leg, but must stand on two legs," Kremlin press chief Dmitry Peskov told reporters yesterday. "In this respect, the prospects for extending the grain deal are of course not that great, considering the current state of affairs."
Players on the international grain market no longer seem to be taking Russia's threats to pull the plug on the grain deal very seriously. Russia has had a good grain harvest and now has an ample supply that they would like to export at high prices. Linking speculation about minimum prices to export licenses and the withdrawal of support for the grain deal are, according to some analysts, the Kremlin's tactics to drive up grain prices.
Political game
With the uncertainty that Russia is creating about the grain deal, Ukrainian export routes via the EU are becoming more important. But there is resistance to this from the EU. According to the Ukrainian farmers' union UAC, the protests by European farmers against the import of cheap Ukrainian grain are political in nature. “Ukraine sells grain in Poland, but not in large quantities,” UAC vice-president Denys Marchuk said in a statement. "The falling prices on the world market for grain and oilseeds are a trend. Certain forces benefit from attributing this to the import of cheap grain from Ukraine. In Poland, farmers are agitated, but let's not forget that elections are coming next fall." According to Marchuk, most grain that enters the EU is retransmitted. In Poland, some grain from Ukraine remains hanging, but that is not an issue in Romania - where there are also protests. There it continues directly via the Danube for transport. The import restrictions imposed by Poland are causing major problems for farmers in western Ukraine, according to Marchuk. "Ukrainian farmers in the west still have about 30% to 40% of the last harvest in sheds intended for sowing and to sell in the spring. During the war, Ukrainians sold grain 40% to 50% below the market price and also did their bit contributed to the army, all without the subsidies that European farmers receive. And now that prices are falling and Polish farmers are earning less than they bargained for, they are blaming Ukraine."
Gamble
The lower grain prices compared to a year ago are also not lost on South American farmers. But corn and soy in particular are receiving support from the extreme drought in Argentina. The country is heading for the smallest soy harvest in 23 years. Farmers in Brazil seem to assume that there is still more room at the top of the market. According to the economic institute of Mato Grosso (one of the largest agricultural provinces in Brazil) IMEA, growers have only sold 61% of their soy harvest. The five-year average for this period is 74%. Farmers in the province are in even less hurry to sell corn. Only 34% has been sold, compared to an average of 61% over the past five years. It should be noted that the large soy harvest probably also plays a role. After all, sales must also be able to be processed logistically and the high yields also put farmers in a more luxurious position to take a gamble.
Brazil's reluctance to sell corn and soy in a way exposes the tension in the grain market at the moment. The market is very much looking for the bottom. At the same time, global supplies are on the tight side, as was confirmed once again this week in the USDA's Wasde report. At the same time, the new growing season in North America has not exactly gotten off to a great start. Drought in particular on the prairies has already taken a toll. The Black Sea region also remains an uncertain factor on the market due to the war. It is therefore not entirely illogical that sellers in this case in Brazil are reluctant and seem to be betting on a turnaround in the market.