Volatility is not abating in the grain trade. Previously, Russia brought in major players with its attacks on Ukrainian ports and transhipment infrastructure, but now the bears are taking over the market and we are seeing a correction. Of course, other factors also play a role. Concerns about drought have subsided somewhat in the US, while drought has had a greater effect in the EU, although you wouldn't say that now if you look outside.
The grain market is taking a big step back. At the time of writing, wheat is down 3% on the Matif and even 4,5% lower on the CBoT. Corn and soy are also showing losses. Corn is down 3% at the time of writing and soy is down more than 2%.
No matter how you look at it, it is almost impossible to ignore Putin in the grain market. Russia is trying to paralyze grain exports from Ukraine and the Kremlin is succeeding to a certain extent. The Black Sea is almost closed, unrest in the last stretch of the Danube has been sparked and the EU has not yet agreed on the access of Ukrainian grain. However, this strategy is not without danger for Putin either. Russia is already quite isolated internationally and the Kremlin naturally does not want to further alienate mild or favorable countries. In that respect, free grain for Africa fits in with a charm offensive by the Russians.
Armistice
According to the chairman of the African Union, the gesture that Russia is making with the 25.000 to 50.000 tons of grain per month for six African countries is not enough and Russia and Ukraine must reach a ceasefire. The chairman then put the ball in Kiev's court and announced that Putin is willing to make a rapprochement. The chairman of the World Food Organization, Carl Skau, said on Friday that he knew nothing about grain made available by Russia, Reuters noted. "We have not had any discussions about free grain to date. We have also not been approached to discuss this." Ukraine is the largest contributor to the UN food program according to Skau.
The grain yield in Ukraine is lagging behind last season, figures from the Ukrainian Ministry of Agriculture show. So far 11,2 million tons have been collected this season, which is 5% less compared to the same period last year. The average yield on the already harvested area of all grains taken together is 4,22 tons per hectare.
Scattered showers provide fresh air
The weather in the US is bringing some relief for a change, especially to the corn and soy markets. The harvest of winter wheat has already come a long way, so it has little effect there anymore. Cooler temperatures across the northern Prairies and Midwest along with scattered showers across the area this past weekend meant that the worst drought concerns are subsiding. This does not mean that the leak is over, but at least some of the corn and soy has recovered.
Brazil plays an important role in the corn and soy trade. The processing industry needs more raw materials than previously expected. This is especially the case with soy. The corn harvest is underway, so there is much less of a squeeze on the supply side there. At the same time, prices in Brazil are very competitive compared to other major suppliers and especially the US. In that sense, there is still room to the downside for the American benchmark.
In the EU, soy is a minor crop, but rapeseed is the most important oil-bearing crop. And the harvest is disappointing according to Strategy Grains. The total rapeseed harvest amounts to 19,3 million tons, according to the market agency. At the beginning of this month, Strategie Grains expected a harvest of 19,8 million tons and in June even 20,4 million tons. Due to the drought, the forecasts have been significantly revised downwards. Last year, 19,4 million tons of rapeseed were harvested in Europe.