China remains difficult to follow in the grain market

The September wheat contract on the Matif yesterday recorded a plus of €2,50, closing at €220,75 per tonne. On the CBoT, wheat prices made an even bigger move, closing 2,8% higher at $6.10¾ per bushel. Soy was also on the rise on the Chicago stock exchange, gaining 2,3% to $13.29½ per bushel. The July corn contract had to give up somewhat and ended up 5.92% lower with a closing price of $0,3½ per bushel. The September corn contract closed 1,6% higher to $5.24¼ per bushel. Although the prices are moving towards each other, the gap between the two corn contracts remains relatively large.

The weather is and remains one of the most dominant factors on the grain market. Drought is in full swing in the US. After a lack of precipitation on the southern prairies where a lot of wheat is grown, it is now the turn of the Midwest where the majority of corn and soy are grown. The problems with drought are certainly not as great as in Kansas, for example, but an increasingly larger area is being colored on the drought map.

Chinese wheat quality is declining
In China, drought is not the problem, but rain during the wheat harvest is a problem for farmers. In the province of Henan, where the most wheat grows, above-average rainfall has had a major impact on the wheat fields. Harvest is underway in the province south of the Yellow River and farmers appeared to be reaping top yields. It falls into the water because of the rain. Various sources show images of alloyed wheat that already has a large germ on it or whose ears are completely blackened by rust. And a dry period to speed up threshing is not possible for the affected growers in China, because moderate to heavy rain is already forecast for Saturday. Henan is not the only province with problems. In almost all wheat provinces in central and southern China, rain fell just before or during the harvest.

China is a major player in the global wheat market in terms of both cultivation and imports and, according to the USDA, has about half of the world's wheat supply. Analysts have critical comments on the figures from China on import and production. This distrust may be further fueled by the fact that the international branch of the state broadcaster is also paying extensive attention to the problems in Henan.

In Europe, the Black Sea Grain Deal also remains a prominent presence in the grain market. There are no really shocking developments. After the UN made a new attempt earlier this week to smooth out the wrinkles towards Russia regarding the Kremlin's objections to extending the deal, Ukraine is now again accusing Russia of not complying with the current deal. According to Ukraine, Russia is delaying ship inspections. In the last two days of May, only two ships were reportedly processed. According to Ukrainian authorities, a total of fifty ships are reportedly waiting for inspection in Turkish territorial waters, some of which have been waiting for more than three months.

Perhaps China could once again come into play for exports from the Black Sea region, and especially Russia. Russia exported record amounts of oil to China (and India) in May. It could be that China is also interested in grain from Russia from several perspectives. The fact that China often takes difficult-to-follow actions on the grain market has become apparent in recent weeks, first with record orders for corn in the US, only to be canceled just as easily.