The grain market has reacted rather lukewarm to Russia's decision to withdraw from the grain deal. Has Ukraine's limited access to the export market already been factored in or is the market counting on another joker being used? The USDA also came up with the Crop Progress report. The adjustments in spring wheat in the US in particular are not in line with what experts had expected.
The effect of stopping the grain deal has been limited, apart from an upward spike early in the trading session. The September contract for wheat on the Matif ultimately closed €0,50 higher at €232,25 per tonne. On the CBoT, wheat even lost some 1,2% to $6.53¾ per bushel. Corn also showed a decline of 1,4% to $4.99¼ per bushel. Only soy showed a small plus, closing 0,3% higher at $14.84 per bushel.
Russia's decision to withdraw support from the Black Sea grains deal has not really boosted the market. Analysts point to various causes for this, a few of which are very common. First of all, hardly any new ships have left for Ukraine in the last three weeks and the Kremlin delayed the inspections that are part of the deal. The deal had effectively been canceled and we saw official confirmation of this yesterday. The underlying problem - the export of grain from Ukraine - was already priced into the market.
Alternative deal in the works?
Then there is Recep Tayyip Erdogan's lukewarm response to the halt to the grain deal. After the news from Moscow, the Turkish president said yesterday that he believes Vladimir Putin wants a deal regulating the export of grain from Ukraine via the Black Sea. Kremlin spokesman Dmitry Peskov yesterday also emphatically left room for a resumption of the deal, provided Russian conditions are met. Putin is scheduled to visit Istanbul in August. And if anyone has proven that they can still do some business with Putin, it is Erdogan. As far as we know, there is nothing concrete on the table between the two gentlemen that can be shared with the outside world. However, there are several experts who suspect that an alternative grain deal could well be presented at the summit between Putin and Erdogan.
Wheat prices in the Black Sea region are under pressure due to all the unrest about the non-extended grain deal. Market agency IKAR cut the price for Russian wheat delivered to the Black Sea by $3 to $228 per tonne. According to SovEcon, Russian grain exports will not suffer much from the termination of the grain deal. SovEcon keeps Russian exports at 5,3 million tons. By comparison, Russia exported 4,0 million tons in June.
Spring wheat is improving
The USDA released the new edition of the weekly Crop Progress report last evening Dutch time. The US department remains relatively optimistic about the growing season, some experts say. Perhaps most surprising is the improvement in spring wheat. 51% of the area now receives a good or excellent rating compared to 47% last week. We did not see precipitation in the northern US last week in the Crop Progress report, but we did this week. The winter wheat harvest is only progressing at the age of thirty-eleven. Until July 16, 56% of the area has been threshed. Last week it was 46%, but the five-year average for mid-July is 69%. The American farmers and custom harvesters So we still have a lot of catching up to do.
The condition of corn has also improved compared to last week. 57% of the area is given the good or excellent status, compared to 55% last week. Last year around this time, 64% of the corn area received a good or excellent rating. Soya also improved last week. According to the USDA, 55% are good or excellent compared to 51% last week. But just like with maize, the soya position is meagre compared to last year. At that time, 61% of the area was rated good or excellent.
The dry month of June has set both crops back after the lead achieved through early sowing. Scattered precipitation in the first half of July came just in time to prevent a complete corn and soybean failure. But the growing season is still long, several analysts say, and weather forecasters are less positive about precipitation forecasts for the second half of July.