Putin is spawning African leaders with free grain

The September contract for wheat on the Matif closed yesterday €2 lower at €251,50 per tonne. On the CBoT, wheat lost 1% to $7.13¼ per bushel. Soy and corn also took a step back with 1,8% and 1,5% respectively. Corn closed at $5.32¾ per bushel and soy at $15.29¼ per bushel.

Russian President Putin is back in the spotlight. Yesterday, during the Russia-Africa summit, he announced that he would make free grain available to Africa. The Kremlin is doing this to soften the consequences of stopping the grain deal for the poor countries on this continent. “We are ready to provide Burkina Faso, Zimbabwe, Mali, Somalia, the Central African Republic and Eritrea with 25.000 to 50.000 tons of free grain each in the next three to four months,” Putin said. This message was received with applause by the audience present. Making grain available for free is fairly easy for Putin to handle. Due to Western sanctions, Russia is having difficulty exporting sufficient grain and the harvests of both last season and the current season are good. 

B set
The summit itself is not an unqualified success for Putin. The leaders were originally scheduled to meet in Ethiopia, but because there is an arrest warrant for Putin from the International Criminal Court, traveling for the Russian president has become risky and the summit has been moved to St. Petersburg. Only seventeen of the 54 African heads of government have traveled to Russia. And the African presidents who have taken the trouble to come to Russia are from the B and C ranks, according to various political experts. Another interesting detail is that Yevgeny Prigozhin, the boss of the Wagner group, walks happily among the African leaders. At least that is evident from photos that have emerged from the summit.

In the military field, the West is quite firmly behind Ukraine, but in the field of grain exports, support has crumbled considerably. Five eastern member states have enforced import restrictions on Ukrainian grain. That package runs until September 15, but plans are already underway to extend it until the end of the year. And now things are starting to rumble in Moldova too. The farmers' association of this country, which lies between Ukraine and the EU, fears that its own members will be squeezed out of the export market by an abundance of cheap grain from Ukraine that has nowhere to go. European Agriculture Commissioner Janusz Wojciechowski emphasized earlier this week the importance of keeping alternative routes open for grain from Ukraine and also proposed compensation to cover higher transport costs for transport via the Danube, Adriatic Sea, the Baltic States, Germany and the Netherlands. settle. And on the latter, Reuters reported yesterday that the additional costs for transport through Ukraine are estimated at $30 to $40 per tonne. Furthermore, Ukraine requests to increase the capacity on these 'Solidarity Lanes' to 1 to 1,5 million tons per month. That is in addition to the transport capacity via the Danube.

Speaking out of turn?
Contrary to what Wojciechowski suggested, there is no agreement at all about compensation for the higher transport costs, according to the correspondence obtained by Reuters. The question of who you should transfer that money to is difficult to answer. And that is separate from additional risk surcharges that carriers and insurers place on transport to and from Ukraine. Such an intervention naturally also has consequences for competition on the grain market, which are difficult to foresee.

Despite all geopolitical developments, the wheat harvest in the EU continues as usual. According to ADM, the harvest in France is approximately 80% complete. Germany still has to get up to speed with approximately 15% harvested, although significant progress has been made in the south of Germany. In the UK the wheat harvest has yet to start. Just like in the Netherlands, the weather is not entirely cooperative.

The weather is also not going well in the US. There the lack of rain is the problem again. Drought in the Midwest is slowly but surely spreading, according to the new drought monitor. However, the market pays only limited attention to this. This week it will certainly still be very warm locally in this area, but for next week the mercury seems to drop somewhat and the chance of precipitation increases. And that expectation puts some pressure on prices, together with American export figures that were at the bottom of the expected range.