Confidence makes and breaks the grain market

The May wheat contract on the Matif closed yesterday €4,25 lower at €249,75 per tonne. The decline that started in the second half of the week also continued on the CBoT. Wheat lost 2% to close last trading session at $6.67¾ per bushel. Corn and soy also fell 1,3% and 0,6% respectively on the Chicago futures market. Corn closed at $6.63¾ and soy at $14.97½ per bushel.

Ukraine continues to largely determine the mood on the market. But the worst fears about the possible problems surrounding the country's grain exports have subsided among market players. With the closure of the borders to Ukrainian grain by some eastern EU member states, things are probably going to get wild, some analysts believe. There is more uncertainty about the grain deal with Russia. But the fact that ships are now being inspected again after a number of interruptions is seen as something positive in the market. An extension of the deal should be arranged in just under a month. It is difficult to predict whether this will succeed. Russian Foreign Minister Sergei Lavrov told journalists yesterday during his visit to Havana that he believes that the West and the UN do not seem to be doing anything to remove Russian criticism of how the grain deal is turning out. But Russia has often resisted signing when push comes to shove.

Dry
The weather reports for the US put further pressure on grain prices last trading session. Rain is forecast for the southern prairies. This is also urgently needed for the wheat in this region, which is characterized by drought throughout the season. Several analysts do question whether the predicted rain is too little and too late to really make a difference for wheat in Kansas, for example. On this week's US Drought Monitor, the southern prairies are still colored deep red.

Concerns about drought are also increasing in Europe. First things first: nothing is happening yet in the vast majority of the EU. On the Iberian Peninsula and on the Italian Po Valleys, the relatively dry winter is starting to take effect. The fact that water supplies have hardly been replenished and that irrigation must now start again, so to speak, makes some analysts concerned about what awaits us next summer.

trade policy
The mood on the soy market is suffering somewhat from the large Brazilian harvest and a somewhat disappointing demand for the oilseed on the world market. Analysts are looking at China with particular curiosity. The comparison with crude oil comes up several times, partly because China, like oil, is also a major buyer of soy on the world market. The Chinese economy is picking up again and you would reasonably expect the country's demand for raw materials to increase. The oil price received a brief boost when Opec announced a production cut, but due to the decline in Chinese demand, the revival was short-lived. Analysts expect that Chinese demand will return, but China clearly does not allow itself to be dictated to.

Something similar now also seems to be happening in the soy market. You know that the Chinese are going to enter the soy market again. It is only unclear when, where and for what quantities. In the recent past, China has often shown that it has a well-considered trade strategy and that it sticks to it. By, among other things, maintaining sufficient stocks, China also has that space.