Risk premium on wheat will be further reduced

The grain market took a hit last trading session. The May wheat contract on the Matif closed €3,75 lower at €247,25 per tonne. Wheat prices also suffered on the CBoT, dropping 1,8% to $6.67 per bushel. Losses were more limited in corn and soy. Corn lost 0,6% to close at $6.52¼ per bushel and soy dropped 0,2% to $15.01 per bushel.

Russia is now becoming a bit of a jester on the international grain market. The Kremlin's actions are no longer taken seriously by analysts and traders. Yesterday, the Russian Foreign Ministry put forward "five systemic problems" that must first be resolved before any further talks on extending the grain deal can begin. Under the current agreement, only the interests of Kiev and the West are served, the Russian ministry said.

Before the deal can be extended after May 18, Russia says the agricultural bank Rosselkhozbank must be reconnected to the Swift international payment system. Another strict requirement is that agricultural machinery and parts may be imported and exported again. Russia also wants access to Ukrainian ports, the restoration of the fertilizer pipeline to Odessa and the lifting of the seizure of the assets of companies active in the export of food and fertilizer. Players in the grain market no longer seem to attach much importance to Russia's big words about blowing up the grain deal, considering yesterday's falling prices.

New trade flows
Algeria, meanwhile, is looking further than Russia for wheat. Rumors circulate that Algeria has purchased between 400.000 and 450.000 tons of durum wheat from Canada and Mexico in a tender. America released the weekly export figures and they were reasonably in line with what the market was expecting. According to some analysts, what may not be sufficiently included in the wheat price for the new harvest is the drought on the American prairies. The new drought monitor was released yesterday and shows little improvement in that area.

Drought also remains a problem in Argentina. The Rosario grain exchange has set the country's corn yield forecast at up to 32 million tons, down 3 million tons from the previous estimate. The soy harvest has also been reduced in the forecast from 27 million tons to 23 million tons. A little further north in Brazil, Conab has actually adjusted its yield forecasts upwards. The difference is not that big for corn with 124,88 million tons this month versus 124,68 million tons in the March forecast. Larger changes have been made to the expected soy yield. Compared to the March forecast, the soy harvest has increased by 2,18 million tons to 153,63 million tons.