The grain market is in calmer waters for a while, or so it seems. For once, news about grain exports from the Black Sea region does not come from Russia, but from the European Union. Furthermore, weather forecasts and yield forecasts continue to dominate the mood in the markets. The September contract for wheat on the Matif saw the smallest possible price change yesterday, closing €0,25 lower at €222,25 per tonne. It was also not a day of major shifts on the CBoT for a change. The July contract dropped 0,3% to $6.04¼ per bushel. Soy was flat, dropping ½ ¢ to $13.24 a bushel. Corn showed a small increase to close 0,6% higher at $5.90¾ per bushel.
The European Union is extending duty-free imports and other restrictions on grain and other agricultural products by one year until June 2024, the Council of Europe decided yesterday. The free access of products from Ukraine is causing resistance among farmers in several eastern Member States. Due to the war with Russia, export via the Black Sea is difficult for Ukraine. Part of the export has therefore been transferred to the EU with the intention of distributing the products from the European seaports further around the world. However, a significant part of the grain and other products remains in the European countries neighboring Ukraine, so that local farmers cannot sell their own products. Various member states have therefore set their own import restrictions. To accommodate these countries (including Poland and Hungary), the EU has created a support package for Eastern European farmers. This is subject to the condition that the unilateral trade restrictions are lifted. Hungary has reportedly not yet complied. Permanent solution In a video message, Ukrainian President Zelensky thanks the EU for extending the current agreement, but advocates working towards a permanent solution for Ukrainian exports to Europe. "In the run-up to our membership of the EU, we must make this temporary liberalization permanent, without exceptions or restrictions," Zelensky said in the video message. A large part of the trade restrictions had already been removed well before the Russian invasion in the free trade agreement that entered into force in 2016. However, minimum prices were still used for fruit and vegetables and quotas for sensitive products such as meat, dairy, sugar and some grains. Russia, meanwhile, has launched a new campaign in which it threatens to no longer continue the grain deal after July 17. The Russian Ministry of Foreign Affairs made it clear in a statement yesterday that the systematic problems for Russian grain and fertilizer exports will not be resolved and the grain deal cannot be extended. The Russian Rosselkhozbank's access to the Swift system and the blockade of the ammonia pipeline to Crimea are mentioned. Those are the same objections Russia raised earlier this month for extending the deal. The Kremlin agreed at the last minute. Records in Asia The US grain export figures contained no major surprises. Corn and wheat exports are largely in line with what the market expected and soybean is even slightly over the limit. The yield forecasts from different countries make or break the mood in the grain market to a certain extent. In Europe, wheat is generally looking good, while things are looking less rosy in the wheat region in the US. China has announced that it is heading for a record wheat harvest and India reports that it is on track for the 112 million tonnes harvest previously predicted. The Buenos Aires Grain Exchange made no major changes to its yield forecasts this week. For maize, the stock market estimates a harvest of 36 million tons and for soybean at 21 million tons. Soybean harvest is slow in Argentina despite low yields.
The September wheat contract on the Matif showed the smallest possible price change yesterday, closing €0,25 lower at €222,25 per tonne. For a change, it was also not a day of major shifts at the CBoT. The July contract gave up 0,3% to $6.04¼ per bushel. Soy was essentially flat, dropping ½¢ to $13.24 per bushel. Corn showed a small increase, closing 0,6% higher at $5.90¾ per bushel.
The European Union will extend duty-free imports and other restrictions on grain and other agricultural products for one year until June 2024, the Council of Europe decided yesterday. The free access of products from Ukraine is causing resistance among farmers in several eastern Member States. Due to the war with Russia, exports via the Black Sea are difficult for Ukraine. Part of the export has therefore been transferred to the EU with the intention of further distributing the products from European seaports around the world. However, a significant part of the grain and other products remain stuck in Ukraine's European neighbors, meaning that local farmers cannot sell their own products. Various Member States have therefore introduced their own import restrictions. To accommodate these countries (including Poland and Hungary), the EU has created a support package for Eastern European farmers. This is subject to the condition that the unilateral trade restrictions are lifted. Hungary has reportedly not yet responded to this.
Permanent solution
Ukrainian President Zelensky thanked the EU in a video message for extending the current agreement, but advocated working towards a permanent solution for Ukrainian exports to Europe. “In the run-up to our membership of the EU, we must make this temporary liberalization permanent, without exceptions or restrictions,” Zelensky says in the video message. Many of the trade restrictions had already been removed well before the Russian invasion in the free trade agreement that has come into effect since 2016. However, minimum prices were still applied to fruit and vegetables and quotas were applied to sensitive products such as meat, dairy, sugar and some grains.
Russia has now started a new campaign in which it threatens to no longer continue the grain deal after July 17. The Russian Foreign Ministry made it clear in a statement yesterday that the systematic problems for Russian grain and fertilizer exports have not been resolved and the grain deal cannot be extended. The access of Russia's Rosselkhoz Bank to the Swift system and the blockage of the ammonia pipeline to Crimea are mentioned. These are the same objections that Russia raised earlier this month for extending the deal. Then the Kremlin agreed at the last minute.
Records in Asia
The US grain export figures contained no major surprises. Corn and wheat exports are largely in line with what the market expected and soy is even crossing the border a little more. The yield forecasts from different countries make or break the mood on the grain market to some extent. In Europe, wheat is generally in good shape, while things are less rosy in the wheat region of the US. China announced that it is heading for a record wheat harvest and India reported that it is on track for the 112 million tonnes harvest previously forecast. The Buenos Aires grain exchange made no major changes to its yield forecasts this week. The stock exchange expects a harvest of 36 million tons for corn and 21 million tons for soy. The soy harvest is slow in Argentina despite low yields. 78% of the area has been harvested against the multi-year average of 92% for this period.