These are turbulent times on the grain market. Russia has launched an attack on Ukraine's grain export infrastructure and the potential impact has not gone unnoticed on the international grain market. And the Russian exporters themselves seem to be benefiting from this for the time being. The USDA came out with the new Crop Progress report yesterday and the most remarkable thing about it is that the department is cautious about making adjustments to the stock of soy and corn.
The September wheat contract on the Matif closed €17,50 higher yesterday at €264,75 per tonne. The wheat quotation was also on the rise on the CBoT. The September contract closed 8,8% higher at $7.57½ per bushel in Chicago. Corn also made a step up, rising 6,3% to $5.61 per bushel. Soy may be a bit stark in comparison, but it is still up 1,5% at $15.22¼ per bushel.
Russian attacks on Ukraine's grain export infrastructure are widely blamed for the grain market rally. The rocket attacks on the Ukrainian ports on the Black Sea have frightened the market, but the fact that the Kremlin is now also targeting the facilities on the Ukrainian side of the Danube caused mild panic yesterday. In addition to the major consequences for Ukrainian grain exports, a departure from nearby Romania could easily drag NATO into the war.
Zelenskiy on collision course with the EU
Ukrainian President Zelenskiy lashed out at the EU last night. The restrictions that five EU member states have enforced to limit the import of grain from Ukraine to protect their own agricultural sector are a thorn in Zelensky's side. The current ban runs until September 15 and the group of five wants to extend it until the end of this year. In a video speech, Zelensky called this unacceptable and un-European. “We believe that Europe will fulfill its obligations regarding this date, when restrictions will be lifted.” Europe has the capacity to act more rationally than closing the border to one or another product according to the Ukrainian president.
Wheat prices in the Black Sea region are on the rise due to all the unrest. Market bureau Ikar quotes $242 per tonne for Russian wheat delivered to the Black Sea. Last week it was $228 per tonne. According to Sovecon, Russia exported 1,1 million tons of wheat last week. That is 34% more compared to a week earlier. The total export for July amounts to 4,3 million tons according to the market agency. In July 2022 this was 2,5 million tonnes. Whether Russia can continue to export grain at this pace is uncertain, according to some experts. It is being taken into account that in response to the Kremlin's attacks, Ukraine could carry out counteractions on the Sea of Azov, the main artery for Russian grain exports. Shipowners could therefore become reluctant to send ships to this area, which poses a certain safety risk.
Wheat harvest is progressing steadily
The USDA released the new weekly Crop Progress report last evening Dutch time. 68% of winter wheat harvested in the US This means we have made a lot of progress compared to last week when the counter was 56% harvested. But compared to the five-year average of 77% threshing, they are still behind. Because the harvest is quite advanced, the USDA has no longer included the status of winter wheat in the report. The condition of spring wheat has deteriorated. 49% of the area receives the status of good or excellent compared to 51% last week. It is notable that the spring barley grown largely in the same states has remained unchanged on 52% of the area as good or excellent. This means that both spring wheat and barley are in much less good shape than last year during this period.
The USDA has not made any major changes to the rating of corn and soy. 57% of the maize area is in good or excellent condition. That's the same as last week. The rating of soy has been reduced by 1% to 54% good or excellent. The small changes in corn and soy are not entirely surprising, but some analysts are calling the USDA quite optimistic. It was warm and dry last week and that is certainly not favorable for maize, 68% of which is in flower. The hot and dry weather will continue this week and only for next week do the weather models indicate that rain may occur and the temperature could drop a bit.