Shutterstock

Analysis Grains & Commodities

Russia is holding back on grain deal talks

11 May 2023 - Jurphaas Lugtenburg

Wheat and soy remain weak on international grain markets. Corn caused a surprise at the CBoT. Drought remains an important theme for analysts. The negotiations on the extension of the grain deal are entering a new phase. Turkey is positive about the chances of success and is already cautiously talking about a two-month extension, while Russia once again emphasizes the bottlenecks.

Would you like to continue reading this article?

Become a subscriber and get instant access

Choose the subscription that suits you
Do you have a tip, suggestion or comment regarding this article? Let us know

The May wheat contract on the Matif went out yesterday at €224,25 per tonne. The September contract yielded €1,75 to close at €232,25 per tonne. On the CBoT, both the May and July wheat contracts lost 2¼¢ to close at $6.28¼ and 6.41¼ per bushel, respectively. Soybean was also down, closing 1% lower at $14.36½ per bushel. Corn was the exception, closing 0,5% higher at $6.45½ per bushel. The July corn contract even rose 1,6% to $5.94 per bushel.

Developments on the wheat market remain a separate story. In the technical analyses, the signals are still red. In the fundamental analyses, several analysts see signs that the market could stabilize or rebound somewhat. Drought on the southern prairies in the US is a common argument. Significant rain has fallen in northeastern Kansas this week. However, several experts say that rainfall last week did not lead to an improvement in wheat in the Crop Progress report earlier this week.

The EU exported 7 million tonnes of wheat this season until May 26,5, according to the latest figures. This means that exports are 11% ahead of last season, when the counter stood at 23,9 million tons. Algerian state buyer OAIC reportedly purchased 10 tons of milling wheat in a tender yesterday (Wednesday, May 500.000).

Russia is holding its ground
Yesterday was also the first day of the new round of negotiations between Russia, Ukraine, Turkey and the UN. Turkish Foreign Minister Mevlut Cavusoglu said at a press conference in Ankara that he believes the deal could be extended by two months after May 18. Russia strongly demands that restrictions on the export of grain and fertilizers must be resolved before Russia can sign an extension of the deal. "We are working on it and our position is known and consistent," Kremlin spokesman Dmitry Peskov said after the first day of negotiations. “So let's wait for the outcome of the negotiations.” Grain and fertilizer are not covered by Western sanctions, but according to Moscow, restrictions in the areas of payments, logistics and insurance form a barrier to grain exports. Today, talks about extending the grain deal continue.

Particularly in corn and soy, market players are already taking cautious positions in the run-up to the new Wasde report that will be published on Friday evening Dutch time. Some analysts expect that the relatively large American corn supply has already been priced into the market. The mood on the market could therefore shift from bearish to neutral. Significant demand for gasoline in the US gave the market some additional upward momentum. Partly as a result, US ethanol supplies fell to the lowest level since November 2022.

El Niño does not yet bring relief
Drought in Argentina will continue to be a problem next season, according to the Buenos Aires grain exchange. We will most likely move from a La Niña to an El Niño and that will usually bring more rain in Argentina (and drought in Australia). "Replenishing moisture in the soil will be very slow," the stock exchange writes in its monthly climate report. The stock market expects problems with drought until September, the start of spring in the Southern Hemisphere. The soy harvest for the 2022/23 season is estimated at 22,5 million tons. That is almost half of last season's harvest. According to the Buenos Aires Stock Exchange, the wheat area for the 2023/24 season amounts to 6,7 million hectares, compared to 6,1 million hectares a year earlier. Wheat sowing begins in Argentina in the second half of May.

Call our customer service +0320 - 269 528

or mail to supportboerenbusiness. Nl

do you want to follow us?

Receive our free Newsletter

Current market information in your inbox every day

Login/Register