At the last minute, an agreement was reached to extend the Black Sea grain deal. The effect on the grain market can be guessed. Prices took a step back in both Paris and Chicago.
The September wheat contract on the Matif lost €9 yesterday, closing at €225,50 per tonne. On the CBoT, the July wheat contract fell 3,8% to $6.23½ per bushel. Corn showed a similar move, closing at $5.61¼ per bushel or down 3,5%. Soy lost 2,3% to close at $13.33 per bushel.
The grain deal between Russia, Ukraine, Turkey and the UN was extended yesterday by two months. Turkish President Tayyip Erdogan announced this in a television speech one day before the agreement expires. This was later confirmed by the other parties. António Guterres, the UN Secretary General, called the extension "good news for the world." The Russian Foreign Ministry writes that the extension is "an opportunity to ensure food security for the world, not in words but in deeds." The ministry does note that the Russian objections raised against extending the deal still stand. "These obstacles must be removed as quickly as possible," the ministry writes.
Trust
The fact that the grain deal is now being continued also has an important psychological effect on the market. A two-month extension means the deal now runs until mid-July. It will therefore mainly be grain from the old harvest that can still be exported and valuable time has been lost due to the temporary stop of ship inspections. The harvest of winter wheat and barley does not start until around July. For the new harvest, uncertainty about exports continues to hang over the market, according to some analysts. But the fact that there is an agreement does at least give players on the market a little more confidence.
The harvest estimates for Ukraine are a lot lower this season. Different authorities come up with different estimates, but a halving of the wheat harvest compared to 4 years ago is seen as realistic. That's before the Russian invasion and the record season that preceded it. Despite all the unrest in the Black Sea region, Russia and Ukraine remain major powers on the world wheat market. Combined, the countries account for just over a quarter of world wheat trade.
Smallest wheat harvest in 60 years?
The Wheat Tour 2023 has started in the US. In Kansas, yield forecasts are less than encouraging. The tour assumes a yield of approximately 2 tons per hectare. By comparison, last year's yield was approximately 2,7 tons per hectare and the five-year average is 3,1 tons per hectare. Participants in the tour report severe drought damage in the wheat and also frost damage in places. The big question is whether the wheat harvest in Kansas will exceed 200 million bushels (more than 5 million tons) or not. Since 1963 (the year of the assassination of John F Kennedy, Martin Luther King's I have a dream speech and the Eleven Cities Tour won by Reinier Paping), the wheat harvest in Kansas has not fallen below 200 million bushels. Concerns about wheat aren't just in Kansas. For Nebraska, the Wheat Tour estimate also comes to approximately 2 tons per hectare. A little further east in Colorado, the wheat is in better condition and the tour calculates 3,6 tons of wheat per hectare.