Uncertainty is once again gaining the upper hand on the grain market. Ukraine is complaining about Russia's attitude to the grain deal. Effectively large ships are excluded from the current agreement, says Ukraine's state secretary for reconstruction. Rain in the US is not bringing relief to the southern prairies, while a drought is looming in the Midwest and there is plenty of debate about how to interpret a message from the Chinese feed industry.
The September wheat contract on the Matif jumped yesterday to close €5,75 higher at €226,75 per tonne. On the CBoT, the July wheat contract rose 2,6% to $6.22¼ per bushel. Corn was also on the rise, gaining 1,1% to close at $5.77½ per bushel. Soy did not join the grain rally, falling 1,4% to $13.22½ per bushel.
Arguments about the Black Sea grain deal are mainly supporting the European wheat market, according to several analysts. The UN sounded the alarm earlier this week that there have been no ships in the port of Pivdennyi since May 2. That is one of the ports covered by the deal. Ukrainian State Secretary for Reconstruction Yuriy Vaskov called Russia's position a gross violation of the grain deal. “Formally, the port of Pivdennyi is covered by the deal,” Vaskov wrote in a message circulating. "But in fact the port is no longer participating. There has been no incoming traffic for a month. In fact, Russia has now found an effective way to significantly hinder Ukrainian grain exports. In the port of Pivdennyi the large tonnage ships are loaded and are now excluded from the deal."
There are also stories going around that Russia may come up with new export taxes. This gives the market support, but several analysts warn that it could well be Indian stories. The Kremlin's previous export tax also turned out to be anything but effective.
Russia is strengthening ties with Iran. At the beginning of March, Russian exporters tendered a total of 700.000 tons of grain in an Iranian tender for wheat delivery in April and May. In practice, according to some sources, more wheat is delivered than agreed at the time. 731.000 tons of wheat are said to have been loaded for Iran.
Too wet or too dry
The weather remains another important factor in the grain market. In Kansas, wheat is suffering greatly from drought. Rain is forecast for the state in the coming days and now the rain is making some analysts nervous again. Winter wheat can hardly benefit from extra moisture at this late point in the growing season. In fact, it can negatively affect the quality of the wheat.
Lack of precipitation in the US Midwest is a risk to corn, according to some analysts. Sowing has therefore gone well, but maize in the area may lag behind if it remains dry in the region over the next two weeks. It is very early to be concerned about drought in this area, some analysts note.
Logic is missing
China plays a special role in the grain market. The country canceled several corn orders from the US. It appears that China is changing the composition of (pig) feed. The Chinese Association of Feed Companies has announced that the share of soy meal in compound feed has been reduced by just under 2% and corn by more than 1%. According to some sources, this is being replaced by cheaper wheat. According to some analysts, this is not entirely logical. Brazil has a top soy harvest and corn looks promising, which puts pressure on prices in Brazil. In recent weeks, there were sources reporting that China was making its move in Brazil.