Brussels policy also becomes liquid under pressure

The May wheat contract on the Matif closed €6,75 lower yesterday, reaching €254 per tonne. The US stock market followed the European example later in the day and the May wheat contract fell 2,3% to $6.81¾ per bushel. Corn and soy also broke the uptrend from earlier in the week, both closing 0,8% lower at $6.75¼ and $15.06½ per bushel, respectively.

The inspection of ships en route to and from the three Ukrainian ports on the Black Sea resumed yesterday after a two-day break. Furthermore, the agreement reached by Poland and Ukraine on the transit of grain via Poland also had a major impact on wheat prices. However, Ukraine's grain export problems are far from over. The Kremlin's propaganda apparatus is working overtime and yesterday Russia leveled allegations of corruption against Kiev. Russia has a clear agenda of its own regarding grain exports and is not interested in competition from Ukraine, according to several analysts.

Brussels moves
Ukraine also has no certainty about alternative export routes via the EU. The worst cold seems to be out of the question in Poland, but several other Member States are still reluctant to move. Yesterday (Wednesday, April 19) there were consultations between the European Commission and the critical member states Bulgaria, Hungary, Poland, Romania and Slovakia. Reuters reports that agreements have been made to limit the amount of grain from Ukraine that can enter the EU. Until the end of June, more grain would be allowed into these five member states than could be transported further into the EU or the world. After the consultation, the Hungarian Minister of Agriculture announced that he wanted to expand the import restrictions. A limit should not only be imposed on the import of grain, but also on eggs, poultry and honey, according to the minister.

Brussels seems shocked by the unilateral actions in which Poland and Hungary took the lead. Various sources report that Europe has released €100 million to compensate farmers in the five member states for the influx of relatively cheap grain from Ukraine. This is said to be remarkable by some analysts, given that earlier this week the Commission was of the opinion that imposing such trade restrictions was up to the Commission and threatened sanctions against the Member States involved. But Brussels appears not to be completely insensitive to the problems of the eastern member states. There are also cynical voices. What plays a role, according to those voices, is that the EU wants to save face. Some of the Member States involved have often gone against Brussels' wishes and the Commission, Council and Parliament have had little response - apart from threatening sanctions and turning off the money tap.

Smaller harvests
The Russian Ministry of Agriculture yesterday provided an update to the harvest forecast for 2023. The total grain harvest is estimated at 123 million tons. That is considerably less than the record of 154 million tons from the previous harvest. The Russian wheat harvest is estimated at 78 million tons, after 100 million tons a season earlier. A forecast for the upcoming harvest also came from Germany. The DRV cooperative estimates the German grain harvest for 2023 at 42,8 million tons. That is around the long-term average. At 22,2 million tons, the expected wheat harvest is 1,6% lower than last season. This is mainly due to a smaller area.

According to analysts, the correction in crude oil prices plays a greater role in the decline in corn and soy than developments in the Black Sea region. In the US, the stock of bio-ethanol is increasing slightly, while corn consumption is slightly above plan if you follow the expected line from the USDA. Furthermore, there are reports that both soy and corn overbought are. This means that the price is above the fair value. In short: prices on the physical market are lower than on the futures market.

There was still a bullish sound from Brazil, but the market did not pay much attention to it. In the large agricultural state of Mato Groso, approximately 20% of the corn grown after soy is sown after the ideal time window. Due to a wet period during the soy harvest, the sowing of corn was delayed and several analysts state that this should be reflected in the yields of the second crop corn as corn cultivation is called after soy.