Wheat market has to chew on failed putsch

The September wheat contract on the Matif opened €5 higher this morning compared to Friday at €253 and shot up to €254,50 in the first trading hours. However, while writing, the price has fallen again to €252, a 2% increase. On the CBoT, the July wheat contract is up 1,5% at $7.44¼ per bushel at writing. Corn and soy are also in the green at around 1,5% compared to the closing price for the weekend.

Russia is one of the largest wheat exporters in the world. Due to the war in Ukraine - also a major player in wheat - there is and remains great tension in the market. While until the weekend analysts mainly looked at developments on the battlefields in Ukraine with the offensive by the Ukrainian armed forces that is underway to recapture territory from the Russian occupier, the surprise came on Friday evening with an uprising by the Wagner group. This private army first appeared on the scene in 2014 during the Russian occupation of Crimea and has since been doing the dirty work for the Russian army with the aim of keeping Putin's hands clean.

Puzzle
The first mission in Crimea was followed by actions in Africa and the Middle East and the last year and a half in Ukraine. As quickly as the advance of the mutinous Wagner troops went, there was a sudden turnaround when the Moscow came into view. The comparison was therefore drawn from various sides with the chaos in 1917 with the February/March revolution (deposing the Tsar) and the October/November revolution (seizure of power by the Bolsheviks).

In any case, it does not benefit Putin's position or the stability of the Kremlin. And although this has only a limited impact on grain exports from Russia in the short term, the country is finding itself in an increasingly difficult position. Traders, shipowners, insurers and banks must maintain some degree of confidence and Russia must not become too much of a pariah on the world stage. After all, buyers must want to continue doing business. And according to some analysts, that is part of the risk premium that is now factored into the wheat quotation, in addition to the fact that the unrest also creates a mood on the market.

Weather market
With corn and soy, the mood does not come from Russia, but from the weather forecasters. Rain was forecast for much of the Midwest in recent days. Rain certainly fell locally, but not everywhere and certainly not to the extent that was predicted. Everything that falls helps of course, but it is not enough to really get growth going, various sources report. For the longer term, the American Meteorological Service maintains a slightly above-average precipitation forecast roughly in the entire area east of the Rocky Mountains.

Drought also plays a role in the EU, although for the time being the consequences for grain cultivation remain much more limited than in the US. FranceAgriMer estimates that 83% of the common wheat area in France is in good or excellent condition, compared to 85% last week. This time last year that percentage was 63% and since FranceAgriMer started tracking this statistic in 2011, wheat in France has not fared so well.