The grain markets were in the green during the last trading session. It's like switching pennies between concerns about grain from Ukraine and the weather. One day one is more in the spotlight and the next the other. Furthermore, players in the market are also preparing for the Wasde report that will be released tonight Dutch time.
The September wheat contract on the Matif closed yesterday €4,50 higher at €232,50 per tonne. On the CBoT, wheat was also on the rise, closing 1,5% higher at $6.26¼ per bushel. Corn and soy also had upward momentum. Corn settled at $6.10¼ per bushel, up 1%, and soy added 0,2% to $13.63¼ per bushel.
Concerns about the availability of grain from the Black Sea region are on the rise again, according to analysts. It is no longer so much the attack on the Nova Kakhovka dam - its consequences on, for example, grain yields and additional logistical problems that dominate the market comments - but attention is more focused on the ammonia pipeline that runs between Russia and Crimea Ukrainian territory. For Russia, after the explosion earlier this week, which blew up the pipeline, a rapid recovery and the resumption of ammonia transport (which was halted shortly after the invasion in February last year) is a condition for agreeing to an extension of the grain deal. It is clear that relations between Kiev and Moscow are bad and this does not improve the tense relationship. Especially because the Kremlin has made fertilizer exports a prestige issue.
The Ukrainian Ministry of Agriculture yesterday again warned about the major consequences that the breach of the Nova Kakhovka dam will have on agriculture. When the reservoir empties, the water source for irrigation of a large area is also gone. According to the ministry, vegetable cultivation there is becoming impossible and farmers are switching to extensive cultivation methods for grain cultivation, resulting in lower yields.
Purchasing desire
The desire to buy on the physical market seems to be picking up again. Algeria has a trend for 140.000 tons outstanding, Japan has secured 87.000 tons of baking wheat from Australia and Canada and Tunisia is closing a tender today for 100.000 tons of wheat. Earlier this week there was already a record export of soy from the US to China in May. Never before has China imported so much soy in one month. There are also increasing reports from China that the wheat harvest is disappointing due to excessive rainfall, resulting in flooding here and there. In places that have not been flooded but where the showers have wreaked havoc, grain has started to settle and germinate, meaning you can no longer use it. The quality is even too poor for the food. It is known that a significant part of the most important wheat regions in China experience rain, but the exact extent remains difficult to estimate. Some analysts cautiously assume that a third of Chinese wheat is affected in some way by the precipitation. This does not mean that a third of the harvest has been lost.
Prognosis
On the American stock exchange, traders and speculators are also taking their positions in the run-up to the Wasde report, which will be released tonight Dutch time. Showers have helped somewhat against drought on the prairies in the US, but the problems are certainly not solved yet. Another interesting thing in the Wasde report is the yield forecast for corn and soy. Sowing went according to the book and an early sowing date usually gives a good yield. That seems like the most likely line from the USDA at this point in the season. It is of course also possible that more attention is paid to current dry conditions and that the yield expectation is therefore estimated more conservatively.