The extension of the Black Sea grain deal is still lagging behind on the grain market. The market was looking for the bottom in the market and now seems to have found it. However, there is currently a bit of a lack of factors to really get the wheat market moving. In the EU, the discussion about Ukrainian grain is now entering a new phase, with east and west facing each other.
At the time of writing (before market close), the wheat contracts on the Matif are down a few tenths. On the CBoT, the July and September contracts are unchanged compared to the closing price for the weekend. So no major shifts on the wheat market. Corn and soy are showing a strong recovery and for both the July contract on the Chicago stock exchange is up more than 2%.
Until the beginning of last week, the chance of a timely follow-up to the grain deal was considered small by several analysts. But as is often the case, Russia managed to surprise the market again. Before May 18 (the expiration date of the deal), the Kremlin decided to cooperate and extend the grain deal by two months. As mentioned, not many players in the grain market had anticipated this change of course from Russia. The risk premium built up due to the possible loss of grain from Ukraine has been reduced in recent days.
Competition
There has been a lot of commotion in the EU about the export of grain from Ukraine in recent months. Due to Ukraine's reduced access to the Black Sea, a significant part of Ukraine's grain harvest has passed through EU routes. The original intention was that it would travel further around the world via European ports. However, some of them have remained in Ukraine's neighboring countries. This is much to the dissatisfaction of local farmers in these Member States. This makes it more difficult for them to find a buyer for their products.
Poland, Slovakia, Hungary, Romania and Bulgaria took matters into their own hands and decided to impose unilateral restrictions on grain imports from Ukraine. In short, they closed the borders. These unilateral actions are in direct opposition to Brussels policy. In principle, individual member states are not allowed to pursue their own trade policy and the European Commission believes that keeping the borders open is a form of support for war-affected Ukraine.
Measures
Brussels turned out not to be completely blind to the problems of farmers in the eastern Member States (or if you are a bit more cynical, try to limit the loss of face) and came up with a support package of €100 million, with the condition that trade restrictions are lifted. cancelled. Various reports are emerging that Hungary does not want to adhere to this condition. The other four Member States would adhere to this. The Commission will only approve the aid package plan if all countries comply with it. Hungary's position is therefore causing resentment among the other member states.
Thirteen other (mainly western) member states are also not very happy with the special support package from the European Commission, they said in a letter. In addition to money from Brussels, national governments themselves may also provide additional (financial) support to their farmers. And perhaps even more importantly: all wheat, corn, rapeseed and sunflower seeds that are transited through the EU must pass through these countries. According to the thirteen countries, including Germany, this does not help to keep the internal market afloat.