The American and European grain traders are slightly different in the game. While Europe is mainly looking at Ukraine, American traders are more under the spell of their own maize harvest, it seems. That is not entirely illogical, by the way. After all, Ukraine and Russia are our backyard, while in the US it is more of a far from my bed show.
The September wheat contract on the Matif rose yesterday by €3,50 to €244,75 per tonne. On the CBoT, wheat took a small step back to close 0,2% lower at $6.56¼ per bushel. Corn and soy showed a modest increase last trading session. Corn closed 0,7% higher at $4.85¾ per bushel and soy 1,1% higher at $14.30 per bushel.
The unrest in the Black Sea region remains an important factor determining the mood on the market, especially for the European grain trade. Threatening language came yesterday from Ukrainian President Zelensky. "If Russia continues to dominate the Black Sea with its territorial borders, blockades us or fires on us, bombards our ports with missiles, Ukraine will return the favor," Zelensky said in a televised speech. "We don't have many ships; but let it be clear: Russia will have zero ships at the end of the war, zero!"
Zelensky thus confirms that the Black Sea is certainly not a risk-free area for merchant shipping. Shipowners and insurers are well aware of this. Ship owners are being very cautious about sending ships to Russian and Ukrainian ports and insurers are putting a risk premium of $10.000 per day per ship on top of normal premiums for the Russian part of the Black Sea and the Sea of Azov.
Egypt remains a buyer in Russia
Despite all the logistical problems, the Egyptian state buyer Gasc has purchased 235.000 tons of wheat in Russia. The price is $12,50 to $15,50 higher compared to the previous tender. This tender is not entirely comparable to the previous one. Payment is usually made upon delivery, but now there is a deferred payment term of 180 days. And borrowing money simply costs money.
The Chinese Ministry of Agriculture today warned of the consequences of the floods in the northeast of the country. Livestock have drowned, crops are inundated and agricultural machinery has been lost in the floods. Crops have been lost as a result and disease outbreaks are lurking due to dead animals in the water. Fortunately, the flooding has not yet had any consequences for winter wheat - which is an important crop in the area - according to the Chinese authorities. The wheat still has to be sown. It should be noted that there is little time to get the area dry and workable again. Apart from, for example, the damage to machines and availability of seed mentioned.
Major differences in harvest expectations
In the US, farmers are cautiously more optimistic about the yield potential of corn. Drought is and remains a problem in the west of the cornbelt, but the corn has suffered less from it than previously thought, various sources report based on observations in the field. With new varieties, investments in irrigation and improvements in fertilization and crop protection, the crop has managed reasonably well through the dry period after sowing and some rain has fallen just in time in recent weeks. Some sources are already talking about an above-average corn harvest in the US. The prospects for the wheat harvest in Canada are less favorable. The rain has come too late on Canada's prairies for wheat to benefit, some experts say.
There are also concerns about the grain harvest in Australia, Argentina, the EU and the Black Sea region in the run-up to the Wasde report, which will be released on Friday evening Dutch time. Market players are cautiously assuming that harvest forecasts could be revised downwards later this week. The tension on the grain market is therefore not expected to decrease in the coming days.