The grain market had gained momentum during the last trading session. Wheat on the CBoT in particular stands out. Mediocre or even poor harvest forecasts for the US are making the market nervous. The unrest about whether or not to extend the grain deal in the Black Sea region adds to this. Despite this, Russia remains the price fighter on the wheat market.
The September wheat contract closed €4,75 higher at €239,75 per tonne on the Matif yesterday. On the CBoT, the July wheat contract even rose 4,1% to $6.60¾ per bushel. Corn and soy were caught up in the positive mood on the wheat market and also closed in the green. Corn rose 1,1% to $5.92½ per bushel and soy closed 14.00% higher at 0,9¾ per bushel.
Concerns about drought in the US wheat belt have been significantly fueled by last Friday's Wasde report. Although rain has again fallen in the driest states of Kansas, Oklahoma and Texas, the recent rainfall is too little and too late to really make a difference. As wheat currently stands in this region, only two-thirds of the winter wheat sown is likely to be harvested. The yields are simply too low to cover the costs of combining. According to some sources, this is the lowest sown/harvest ratio since 1917.
Major contrast between wheat and corn
The fact that wheat in the US is not doing well was confirmed again yesterday in the Crop Progress report. 29% of US winter wheat acreage is rated good or excellent by the USDA, unchanged from last week. The percentage of poor and very poor has been adjusted somewhat. Progress is being made with the sowing of spring wheat, but with 40% sown this season is considerably behind the five-year average of 57%.
American farmers are making progress with sowing corn and soy. Of the planned corn area, 65% is in the ground, compared to 59% in the five-year average. 30% of the corn is above, compared to 25% in the five-year average. At 49%, barely half of the acreage of soy is in the ground, compared to 36% for this week in the five-year average. 20% of soy is at the top, compared to 11% in the last five years. The starting point for corn and soy is therefore a lot more favorable than wheat.
Take responsibility
In addition to the problems with the weather in the US, the Black Sea grain deal also continues to cause a lot of uncertainty in the market. The Ukrainian Ministry of Foreign Affairs announced yesterday that it is seriously considering the possibility that the current agreement, which runs until May 18, will not be continued. UN CEO Martin Griffiths said yesterday that he will continue to make efforts to extend the deal. “Continuation of the grain deal is essential,” Griffiths said at a UN security meeting on Ukraine. “We continue to call on all parties to take their responsibility.” The Ukrainian ambassador to the UN called it "disgusting that Russia is making it appear as if it is the loser of the deal."
The Russian ambassador accuses Ukraine of obstructing the opening of the ammonia pipeline to the Black Sea. Erecting barriers to Russian grain and fertilizer exports is the reason for the Kremlin not to agree to an extension of the grain deal. Russia further emphasized that the poorest countries do not benefit sufficiently from the grain deal in its current design. Of the approximately 30 million tons of grain exported from Ukraine under the deal, 600.000 tons went to Afghanistan, Ethiopia, Kenya, Somalia and Yemen via the World Food Program.
Sale
Prices of wheat from the Black Sea region are under pressure. Several sources report that an Algerian tender for wheat has been filled with tenders from Russia at $245 per tonne. Market agency IKAR lowered the wheat quotation for the Black Sea region by $6 to $248 per tonne. According to SovEcon, Russian exports are taking a step back this month. The market agency expects exports of 3,8 million tons in May compared to 4,3 million tons in April. Russia therefore remains the price fighter on the wheat market.