Russia continues to block grain trade

The grain market is booming. At the time of writing this article, the September wheat contract on the Matif is at €264,25, or €17 higher than Friday. On the CBoT, the 8,1% increase to $7.53¾ per bushel is even slightly stronger. Corn is also up significantly, up 5% from Friday at $5.53¾ per bushel. Soy lags somewhat behind grains, but is still 1% higher at 15.17¼ per bushel.

Russia has not only withdrawn from the Black Sea grain deal, but appears to be planning to shut down all Ukrainian grain exports. Attacks on the Black Sea ports of Ukraine by Russia, the market has now become somewhat used to this. This morning, the Kremlin went a step further and launched an attack on a transshipment facility at the mouth of the Danube. Several photos of damaged grain stores are circulating on social media. The Danube is the most important alternative route for Ukrainian grain exports now that the Black Sea is effectively closed. And that has potentially major consequences for world trade that could be noticeable in the short term.

Close to NATO
The attack near the Danube also brings Russia very close to NATO territory. And that is perhaps an even bigger risk that Putin is apparently willing to take. That this is not without danger, we saw, for example, last November when a rocket landed in Poland during the period when the Ukrainian city of Lviv was under fire. That ended in a fizzle because it was probably not a Russian missile, although there are various reports about that. Such a mistake with a drone near Romania could mean a new crisis. Romanian President Klaus Iohannis, among others, warns about this.

Drought in the EU is not without consequences
In addition to the new developments around the Black Sea region, the European Commission's scientific office, the JRC Institute, released the July edition of the Mars Bulletin. Both winter and summer crops did not survive the late spring followed by a dry period well. The rain that has fallen in Europe since the end of June was insufficient to make up for the rainfall deficit. The spring barley in particular has suffered significant damage. The JRC estimates the average yield at 3,62 tons per hectare. That's a whopping 14% below the five-year average, down 3% from the June edition of the Mars bulletin. The expected wheat yield is estimated at 5,59 tons per hectare, which is almost equal to the five-year average of 5,58 tons per hectare. Compared to a month earlier, the JRC has lowered the yield forecast by 2%. Scandinavia, the Baltic states and the Iberian Peninsula in particular stand out in a negative way.

In the US, weather reports have improved for the Northern Prairies and western Corn Belt. The US Meteorological Service predicts above-average precipitation throughout the northeastern US and the period up to August 2. Strangely enough, the market seems to pay little attention to this. For corn, which is generally strongly correlated with wheat in terms of price, you can argue that the plus on the American stock market at the time of writing stems from developments in the wheat market. This is not the case with soy and the price is also in the green.