With the flare-up of the war in Ukraine, the grain market is also in a state of flux. While earlier this week there was a bit of disdain for Russia's cancellation of cooperation with the grain deal, the mood has now turned like a leaf on the tree. The direct attacks on the ports in particular are causing unrest.
The September wheat contract on the Matif jumped yesterday to close €19,25 higher at €253,75 per tonne. That is the highest closing price in three months. Wheat was also on the rise at the CBoT. In Chicago, the September contract rose 8,5% to $7.27¾ a bushel. Corn continued its upward momentum, rising 3,2% to $5.45½ per bushel. The August soybean contract was essentially unchanged at $14.91¼ per bushel.
The fact that Russia has withdrawn seemed to have only a limited effect on the grain market at the beginning of this week. The deal had not worked in practice for weeks because few or no new ships were registered for a trip to Ukraine. Stopping the deal was already more or less included in the price and another way would certainly have been found to get grain from Ukraine. There is now nothing left of the resigned mood among traders and analysts on Monday and Tuesday.
Ports in the line of fire
The war between Russia and Ukraine is escalating further. It is now raining missiles on the ports of Odessa, Chornomorsk and Mykolaiv for the third day in a row. According to Ukrainian President Zelensky, about 1 million tons of grain are ready for transport in the attacked ports. According to Zelensky, this should have already been with customers in Africa and Asia. The attack on Wednesday damaged a terminal carrying 60.000 tons of grain destined for China, according to the Ukrainian president.
Perhaps even more disturbing, Russia announced that it considers all ships en route to Ukrainian waters to be potentially carrying war materials, regardless of their flag. The Kremlin has also declared parts of the Black Sea unsafe. The White House calls it a signal that the Kremlin may be paving the way to justify attacks on merchant ships. In addition, Washington says it has indications that Moscow is laying new sea mines. The option of transporting grain via Romania to the Ukrainian ports on the Black Sea is therefore closed. This is separate from the fact that shipowners and insurers no longer want to allow ships to sail to Ukraine or place a huge risk premium on them.
Heat wave in the US
In addition to the war premium, which is being significantly increased, especially on the wheat market, the weather premium is also being calculated higher. Temperatures well into the 30s are forecast for the coming week in large parts of the Midwest. The high temperatures and no significant rain put a brake on the yield potential of corn and soy in this area. Soy may recover later in the season, but corn is now in the phase where the kilos need to be produced. Corn has been somewhat down on the CBoT in recent weeks, partly due to the expansion in acreage and the relatively high yield forecast from the USDA, but some analysts think that the market has now reached a tipping point.