These are and will remain turbulent times in the grain trade. Russia managed to push up the price of wheat a week and a half ago with an unexpected attack on the Ukrainian port facilities at the mouth of the Danube. The market is now used to it and players are looking for the bottom in the market. Emotions dominate and fundamental developments, rightly or not, add an extra pendulum to the prevailing mood.
The September contract for wheat on the Matif closed yesterday €2,75 lower at €233,75 per tonne. Wheat also took a step back on the CBoT, falling 1,9% to $6.40½ per bushel. Corn showed a similar decline of 2% to $4.87½ per bushel. Soy also closed in the red, losing 1,1% to close at $14.29¾ per bushel.
Less value is attached to developments in Ukraine on the grain market, you could say. Russia launched a new attack on a Ukrainian transshipment facility on the Danube early Wednesday morning. That pushed the wheat price up a bit early in the trading session, but was not enough to maintain that mood. More favorable weather in the US is cited by many analysts as an explanation for the downward spiral in the grain market. This mainly affects the yields of corn and soy. Like large crops, they attract the entire grain and oilseed complex.
food security
Ukrainian President Zelensky accuses Putin of endangering the world food market with his attacks. According to Ukrainian authorities, Russia has carried out 26 attacks on port facilities and five attacks on private ships, losing 180.000 tons of grain since the Kremlin withdrew from the grain deal XNUMX days ago. Big words from Zelensky, but looking strictly at developments on the market, the trade does not pay much attention to them.
Now that the wheat price has fallen, demand on the physical market is picking up. After Algeria and Tunisia, it was announced yesterday that the Egyptian state buyer GASC has also taken part in a new tender. GASC has purchased 260 tons of wheat from Russia at $300.000 per ton C&F (free) and 262 tons from Romania at $60.000 per ton. These are prices that are in line with what was paid when the grain deal was still in effect. We can almost say that Russia's intention to drive up grain prices with targeted attacks is not succeeding.
Bread and games
EU foreign policy chief Josep Borrell warns poorer countries to be careful of Russia's supply of cheap grain. Reuters writes this based on a leaked letter that Borrell sent to twenty countries on Monday. It is a tactic of the Kremlin to create a relationship of dependency, according to the foreign chief. Weaknesses in the economies of the countries concerned are being magnified, as is the problem of world food security. The EU can also take matters into its own hands here. A UN top executive recently warned that the EU should not subordinate food production to sustainable agricultural goals. Other parts of the world are unable to absorb a reduction in EU production.
For players in a sales position (arable farmers), these are currently not the most favorable times on the grain market. Sales prices on the physical market are more than €100 lower compared to last year. This is something for buyers to think carefully about. Prices are generally at their lowest levels around harvest time and whether prices will fall further in the coming weeks will depend on yields. Do farmers and cooperatives in France, England, Germany, Poland, etc. have sufficient storage space or will a large volume still come onto the market that will have to be sold behind the combine? Another factor is the quality of wheat, which deteriorates with the changeable weather. This may offer opportunities for the feed industry and livestock farmers, while for mills the supply of European milling and baking wheat is not improving day by day.