The grain market remains highly volatile. After almost weeks of decline, especially on the CBoT, the wheat price rebounded. The alleged drone attack on the Kremlin made the market nervous. Whether there will be a real turnaround on the market or whether it is just a temporary build-up of the war bounty is open to debate. In any case, the export of grain from Ukraine remains a major uncertain factor, which will only increase due to capacity problems and Romania.
The grain market showed a cautious recovery last trading session. The May contract for wheat on the Matif increased by €2,25, closing at €235 per tonne. On the CBoT, wheat makes a bigger step. The May contract closed 5,2% higher at $6.26¼ per bushel. Corn and soy were also on the rise on the American stock market. Corn closed at $6.45¼ a bushel, up 1,1%. Soy increased 0,6% to $14.48 per bushel.
The increasing tension between Russia and Ukraine is once again in the spotlight of players in the grain market. Russia says Ukraine carried out a drone attack on the Kremlin yesterday with the aim of killing Putin. Images of the drone above the Kremlin are circulating on the internet. Ukraine denies any involvement in the attack. We do not know what happened, but several experts say it is unlikely that Ukraine is behind the attack, although that cannot be ruled out. What we do know is that the incident does not make negotiations on the extension of the grain deal any easier. A meeting on this subject is planned for tomorrow in Istanbul, although the Russian Ministry of Foreign Affairs is keeping in mind whether a Kremlin delegation will also be present.
Boundaries
Grain exports from Ukraine are now becoming dire. The grain deal is in jeopardy and there is increasing resistance in the EU to the import of relatively cheap grain from Ukraine. In addition, there is now the news that Romania may have less space for the transit of grain from Ukraine in the coming season. At least that is what Reuters reports based on statements from Comvex, the operator of a large grain terminal in the Romanian port of Constanta. Since the Russian invasion last February, about a third of Ukrainian grain exports have passed through Constanta, with a throughput of 8,6 million tons in 2022 and 3,3 million in the first quarter of 2023. The fact that so much grain could be exported via Romania was partly due to the very poor grain harvest in the country due to drought. “The upcoming harvest in Romania looks much bigger and that means there may be less room for Ukrainian grain,” Viorel Panait, manager at Comvex, told Reuters. "The terminal operators will not want to disadvantage their traditional customers." Constanta is a more attractive port for shipowners under the grain deal than the ports of Ukraine on the Black Sea, because inspections and long waiting times are avoided.
Playing field is open
Analysts' opinions differ widely as to which direction the grain market will take in the coming weeks and months. In the technical analysis the signals are red. A further decline does not seem unlikely and the support level on the Matif is at €206. The fundamental analyzes are less clear. Wheat is generally doing well in the Northern Hemisphere, Brazil has a very good soy crop and corn also looks promising and in the US corn and soy sowing is going according to the book. Sufficient supply could bring the market into calmer waters, several analysts say. They also point out that it is exceptional for grain prices to peak two seasons in a row. Other analysts are less certain about this. Russia and Ukraine are important exporters on the world market and the yield expectations for these countries are, partly due to the war, much less rosy than last season, not to mention the export and trade restrictions that both countries face to the left or right. This group also points out that the good harvest forecast for the Northern Hemisphere has certainly not yet been realized. It is dry in the American wheat belt and Europe has also had problems with drought in recent seasons that have not yet been completely resolved. Consider, for example, the Iberian Peninsula and parts of southern France and northern Italy. And yes, a double peak in wheat prices does not happen often, but it is not the case that it never happens, think of 2011 and 2012 for example.