Putin seeks support in Africa for 'new grain deal'

The September wheat contract on the Matif closed €3 lower yesterday at €261,75 per tonne. On the CBoT, wheat rose 0,5% to $7.61½ per bushel. Soy closed lower on the CBoT down 0,5% to $15.15½ per bushel. Corn also showed a loss of 0,5% to $5.58 per bushel.

The grain market cooled down a bit last trading session, but volatility has certainly not gone away yet. Major headline-grabbing news from the Black Sea region was missing, but that doesn't mean nothing is happening. Reports that emerged yesterday that a Romanian cargo ship was damaged in the Russian attack on the Ukrainian terminal on the Danube last Monday do not reassure the market that Ukrainian exports via the Danube will resume quickly. Insurance companies are reviewing their policies and, according to some sources, are considering removing coverage for this area or increasing the risk premium. There are also sources that report that barges are being loaded again in Ukraine. This indicates that there is only a short pause and that exports via the Danube can be resumed fairly quickly.

Keeping Ukrainian grain attractive
The European Commission's grain import and export figures could provide more clarity about exactly how Ukrainian exports are doing. Normally these statistics are published weekly, but the Commission has postponed this publication for the second time in a row. The next update is now scheduled for August 1. Agriculture Commissioner Janusz Wojciechowski announced yesterday that the EU is ready to export Ukrainian agricultural products through the 'solidarity lanes'. In addition, Europe also wants to cover the additional costs involved. "Trade with Ukraine is not attractive enough. Russia will benefit from this situation because it will be cheaper to buy grain from Russia than from Ukraine that is transported via Poland to the Baltic ports," Reuters quotes Wojciechowski as saying. The commissioner does not mention what this will cost.

Meanwhile, Russian grain exports continue unhindered. The grain harvest in Russia is lagging behind last season. SovEcon reports that 20% of the sown area has been harvested up to and including July 14. In the same period last year, 22% of the area was threshed. Putin has planned a summit this Friday with 17 African leaders to discuss how Russia can help with food supplies now that the grain deal has been scrapped. One of the Kremlin's criticisms of the grain deal was that most of the grain did not reach the countries that need it most. Russia is heading for a good harvest this year and Moscow has been hinting at an alternative plan for the grain deal for some time. A combination of food aid and the provision of grain by commercial parties is being considered. Since the invasion of Ukraine, Moscow has become a pariah on the world stage. However, the Kremlin is strengthening ties with countries that are less Western-oriented and such a proposal fits in seamlessly. A meeting between Putin and Turkish President Erdogan is also planned for August. No date has yet been set for this, but the grain trade is expected to be high on the agenda here too.

Heat wave
In the US, weather reports continue to determine the mood in corn and soy. Temperatures in the Midwest are rising before the mercury rises well above 30 degrees by the end of this week. However, less warm weather is forecast for the beginning of next week and, more importantly, rain is also expected. If that prediction comes true, it could give soy in particular a boost. Other moderately bearish news came from Argentina. The country announced that it would extend the favorable exchange rate arrangement for corn exports until August. The country is in economic trouble and is desperate for hard foreign currency. A major source of foreign exchange is the export of agricultural products. To stimulate exports, corn dollars can be exchanged for pesos at approximately 25% above market value.