Russia seems to be starting a new campaign against further extension of the grain deal. The Kremlin agreed to a two-month extension earlier this month after much grumbling. Sergei Lavrov, the Russian foreign minister, said yesterday that a further extension is unlikely.
The September wheat contract on the Matif closed yesterday at €225,75 per tonne. That is €2,50 lower than before the weekend. The CBoT was closed yesterday for Memorial Day. Prices did look up before the weekend. Wheat added 1,9% to close Friday at $6.16 a bushel. Corn continued to gain momentum, closing 2,2% higher at $6.06 per bushel, and soy closed at $13.37¼ per bushel, or 1% higher. Due to Memorial Day, the USDA's CropProgress report is also a day later and will not be released until tonight Dutch time.
Russia is putting a further extension of the grain deal at risk. The Kremlin has been warning for some time that the grain deal will not be extended if the obstacles to Russian grain and fertilizer exports are not removed. Nevertheless, Russia agreed to a two-month extension earlier this month. But the Kremlin will not continue with this, as Lavrov made clear on Monday, May 29. "If everything remains the same, and that seems to be the case, then we have to conclude that the current grain deal is not functioning," Lavrov said during his visit to Nairobi (Kenya) in response to questions from the press present. It memorandum between the UN and Russia, which was agreed at the same time as the grain deal, is not being respected, according to Lavrov.
Black Sea wheat price takes a step back
Prices for Russian wheat are now under pressure. Market agency IKAR puts the quote for wheat delivered on the ship on the Black Sea at $230 per tonne. That was $242 per ton last week. The lower price does not exactly help Russian exports. Sovecon writes that 1,07 million tons of grain were exported last week compared to 1,12 million tons a week earlier. Of the total exports last week, 0,97 million tons was wheat compared to 1,07 million tons the week before. Russian farmers have sown about 25 million hectares until May 24,6, according to Sovecon. Last year at this time the counter stood at 22,3 million hectares. Of the area already sown this season, 11,1 million hectares is spring wheat compared to 9,6 million hectares last year. Drought can still be a point of attention according to Sovecon. "There is growing concern about growing conditions in Siberia and the Urals. Current conditions for these regions are challenging, but it is still a little too early to be overly concerned. If the plants receive even light rainfall in early June and slightly more precipitation in the second half, the potential impact on the harvest can be limited."
Good harvest included in the price
Analysts think that the grain market will remain quite volatile for the time being. The wheat market has been on a steady downward trend since its peak in May 2022. The decline may have been further accentuated due to good harvest forecasts for the Northern Hemisphere. In France, for example, 94% of the wheat area received the status of good or excellent last week compared to 90% last year. That relatively good harvest is now priced into the market. But drought in the US and now in parts of Russia could change that mood. In that sense, it will be exciting to see what the first harvest results are. The grain stock is relatively small according to the latest data from the USDA and a disappointing harvest in Kansas - where the combines are due to be harvested in a few weeks - could easily trigger a buying wave. According to some analysts, this is something to take into account if you have to commit wheat for the coming season.