Grain market players had a hard time chewing on the Wasde report over the weekend. Especially in the wheat market, the report has a clear effect on the market. There are various stories about the extension of the grain deal. The Russian news agency TASS reported that a deal is close to being completed, while Ukraine is seriously considering that there will be no direct follow-up after May 18.
On the Matif, the September wheat contract is up by almost 2% at €239 per tonne at the time of writing before the close of the stock exchange. On the CBoT, the upward momentum is even stronger and wheat is 3,7% higher than before the weekend. Corn and soy are also in positive territory, although the mood here is somewhat more subdued than with wheat. Soy is more than 1% higher and corn is up 1,75%.
Total world wheat production in the 2023/24 season is estimated by the USDA in the Wasde report at 789,8 million tons. A larger harvest is expected in Argentina, Canada, the EU and India, among others. That more than makes up for the expected lower yields for Ukraine, Russia, Australia and Kazakhstan. Top yields are certainly not expected in the US either. Although the wheat area is relatively large, not all of it will be harvested, the USDA expects. Especially in Texas, Kansas and Oklahoma, an above-average amount of wheat is expected to remain in the country.
World wheat consumption is estimated at 791,7 million tons. That is 3 million tons less compared to last year. There is mainly less demand for wheat for feed and other applications, partly because there are alternatives. The ending stock of wheat would therefore amount to 264,3 million tons. That is 1,9 million tons less than last season and the smallest ending stock since 2014/15. More than half of that stock is owned by China.
Corn looks promising
The US is heading for a very good corn season. The area has been expanded compared to last season and the growing season has been very good so far. The USDA therefore expects a harvest that will be 10% larger than last season. Wasde is also expecting a very good maize harvest worldwide, which will break a record in the 2023/24 season. Global corn consumption is increasing by 4%. The world ending stock grows by 15,5 million tons to 312,9 million tons. This increase in inventories is largely attributable to the US.
The Wasde report is also optimistic in its forecast for oilseeds. Global production increases by 43,8 million tons to 671,2 million tons. The increase is mainly due to a large soy harvest in North and South America and a large rapeseed harvest in Canada and the EU. Oilseed processing is also increasing, according to the USDA. But with an increase from 20,7 million tons to 542,5 million tons, the increase in processing is less strong than in production.
Grain deal not hammer deal
In addition to yield forecasts, the availability of grain from the Black Sea region remains an important factor on the grain market. The current grain deal between Russia, Ukraine, Turkey and the UN expires on May 18. The negotiations for an extension are going very smoothly. The parties involved were in Istanbul last week, but they were unable to reach an agreement. Today (Monday, May 15), the Ukrainian Ministry of Foreign Affairs announced that it was receiving conflicting signals about the extension of the grain deal. "The situation (after the negotiations in Turkey) has not really changed and we are receiving conflicting information about the extension of the grain deal and the likelihood of its extension," the ministry's Olga Trofimtseva said in a briefing.
New talks on the grain deal are not planned this week, according to the Ukrainian Ministry of Foreign Affairs. According to the ministry, it cannot be ruled out that the grain deal will not be extended after Thursday. "Such a termination, namely with Russia's withdrawal from the initiative, is possible, but for everyone - Russia first - it means an escalation of the situation and only makes future negotiations more difficult.
Sow confusion
The Kremlin's major sore point with the current grain deal is that it believes that despite the fact that grain and fertilizer are not covered by Western sanctions, Russia does not have free access to the world market. While this is also regulated in the deal in addition to access to three Ukrainian Black Sea ports. The Russian news agency TASS reported last Friday (May 12) based on 'a well-established source' that an agreement is within reach. According to this source, the Kremlin would once again be eager to get an extension of sixty days. TASS is the only news agency that is talking about an impending agreement.
Despite all the discussion and uncertainty about the grain deal, Ukraine's grain exports in May are not entirely disappointing. From May 1 to 15, 1,712 million tons of grain were exported from Ukraine. For comparison, in April Ukraine exported 3,619 million tons.