The grain market is giving very contradictory signals. To a large extent it is still a real weather market. Rain in Europe is not good for winter wheat, while corn and soy in the US are recovering from a little moisture. Crops are washing away in northeast China and the storm is not over there yet. A typhoon is approaching. Brazil provides some air to the market with ample supply of maize during the harvest that is now in full swing there.
The cautious recovery in the wheat market that started last Friday continues today (at least in the first hours of the trading day). On the Matif, the wheat contracts are approximately 1% in the green at the time of writing. In Chicago the increase was a few tenths of a percent stronger. Soy and corn failed to continue the upward trend seen before the weekend. At the time of writing, corn is approximately 1,5% in the red and soy is even around 3%.
Rain is one of the central themes on the grain market. In parts of northwestern and central Europe, the wheat harvest has been at a standstill for some time due to rainfall. Beneficial for summer grains, potatoes, onions and beets, but not for (over)ripe winter wheat. Shot, alloying and quality cause considerable problems locally.
Floods in China
Fortunately, the situation in Europe is not nearly as bad as in China. The general media mainly focuses on the floods in and around Beijing, but larger parts of northeastern China are suffering from flooding. Local media reports that part of the rice harvest was lost due to rain in Jilin and Heilongjian provinces. And the suffering is probably not over yet because this week a typhoon will also hit the region if the weather forecasts are correct. Northeastern China, which in addition to the above-mentioned provinces also includes Inner Mongolia, is an important agricultural area in China. Approximately 45% of Chinese corn production comes from this region, 60% of soy and 20% of rice. In a world food market that has already been quite tense since the Russian invasion of Ukraine, such a setback could herald a new rally. Whether this will actually happen in the short term remains to be seen. In addition to a huge population, China also has enormous intervention stocks (at least on paper).
Things remain turbulent in the Black Sea region. Last week, Ukraine managed to stir the market a bit with an attack on a Russian oil tanker using a sea drone, a kind of remote-controlled torpedo. The Kremlin once again sowed unrest over the grain deal before the weekend. According to Russia, the American bank JP Morgan has stopped providing transactions to the Russian agricultural bank Rosselkhozbank. In recent months, JP Morgan has arranged payments for international agricultural transactions under strict conditions with the permission of the White House. According to the spokesperson of the Russian Foreign Ministry, this direct line was cut off as of August 2. Dmitri Peskov, the spokesperson, was logically critical of the severing of the tie. According to Peskov, the US mainly makes empty promises and does not actually take action. The UN, US or JP Morgan have neither confirmed nor denied this.
Brazil asserts itself
The mood in soy and corn is partly made by the weather forecasters. While the northern half of Europe is waiting for drier weather, showers come at just the right time in the northern US and southern Canada. Summer grains, corn and soy in the region were in dire need of a drink of water, according to several experts. The precipitation is accompanied by more moderate temperatures, which results in growing weather. However, the US certainly does not have the sole right in the corn and soy trade. The major competitor is Brazil at the moment. The corn harvest is in full swing there and due to a good harvest there is a relatively large supply from the field. Local players report that the corn price on the physical market in several regions is at its lowest point in more than a year.
Soy threshing has been over for a few months in Brazil, but the price of oilseed is under pressure. It is not the demand because in the first six months of this year, according to Secex (Foreign Trade Secretariat), a record amount of soy was exported. In July, exports took a step back compared to June, but if you compare this to July 2022, almost 30% more has still been exported. However, the average price last July fell to the lowest level since July 2021 according to Secex.