Shipowners sort before the end of the grain deal

The September wheat contract on the Matif closed yesterday €3 plus at €232,25 per tonne. On the CBoT, wheat was trading at $6.49½ per bushel, up 2,1% from a day earlier. Corn was largely unchanged with a small gain of 0,2% to close at $5.71¾ per bushel. Soy also captured the upward momentum last trading session, gaining 0,8% to $15.20½ per bushel.

Whether or not to extend the Black Sea grain deal is perhaps the greatest uncertainty in the grain market in the short term. The chance that the Kremlin will agree to an extension of the deal is not estimated by several analysts to be high, but Putin has surprised the market more often and experts do not dare to throw their hands into the fire for either option. What we can say is that the NATO summit that started yesterday in Vilnius is further straining relations between the North Atlantic Treaty Organization and Russia. Sweden - which has pursued neutrality since the Napoleonic Wars - will most likely join the alliance after Turkish resistance to membership ends. It also appears that the summit (which continues today) will make commitments to Ukraine about membership, once the war with Russia is over, and additional military support. Exactly the opposite of what Putin wanted to achieve with his war in Ukraine.

Russian response
A Russian response was therefore inevitable. Yesterday, the Kremlin carried out several missile and drone attacks on cities in Ukraine. The most striking for the grain market is the attack on Odessa. The port of Odessa is covered by the current grain deal and several sources call the attack a violation of the grain deal because port facilities were also hit. However, the grain market responded tepidly. This can largely be explained by the fact that shipowners have lost confidence in the deal for some time and virtually no ships have been registered in recent weeks.

Drought is not just happening in North America
In addition to the problems in the Black Sea region, the yield forecasts are also creating mood in the market. The French Ministry of Agriculture yesterday released the first harvest forecast for soft wheat. The ministry expects a yield of 35 million tons. That is 4% more than last season, but the ministry's forecast remains below the expectations put forward by various commercial agencies. In the US, the trade is still impressed by the lower rating of spring wheat by the USDA. There has been quite a bit of precipitation on the northern prairies, experts thought, but this is not reflected in the condition of the spring wheat in the Crop Progress report from early this week. In fact, the condition has deteriorated.

Moderate growing conditions are not exclusive to North America. In Argentina, winter wheat is growing moderately due to a lack of moisture, the Buenos Aires grain exchange wrote yesterday. India could also use more rain according to various sources. It is now the monsoon season there and there are showers, but they are quite scattered.