Analysis Grains & Commodities
Putin not in favor of grain deal
An extension of the grain deal has come no closer after the meeting between Putin and Erdogan in Sochi. In short: Erdogan keeps his spirits up while Putin remains very reserved. In other parts of the world, drought is a serious problem. In America, corn and soybeans have been hit by the dry second half of August, although relief now seems to be on the way. In Australia El Niño causes problems in wheat and barley.
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Choose the subscription that suits youThe September contract for wheat on the Matif closed €1,75 lower yesterday at €219,50 per tonne. The most traded wheat contract is December, which gave up €1 to close at €234 per tonne. The CBoT was closed yesterday for Labor Day.
Turkish President Erdogan's visit to Russian President Putin in Sochi yesterday has yielded little concrete information. Both leaders placed quite different emphases on the outcomes after their first meeting. Erdogan emphasized that the old grain deal could be revived in the short term. The Russian demands are known and if the West meets them, the grain deal can be resumed in no time. Erdogan did take a swipe at Ukraine. According to Erdogan, Ukraine should be less ambitious in order to take new steps together with Russia.
Purchased
Putin once again made it clear that he feels cheated by the West. Russian grain and fertilizer exports are not covered by Western sanctions, but due to obstacles in the areas of payments, transport and insurance, Putin believes that Russia does not have free access to the world market. You can make the critical comment that Russia was able to export a huge amount of grain last season. Putin pointed out that 70% of the grain shipped under the deal ended up with rich countries. Since Russia withdrew from the grain deal in July, prices have not risen and there are no physical shortages, according to the Russian president. The Kremlin is working on an alternative plan specifically aimed at poor African countries. According to Putin, an agreement with Burkina Faso, Zimbabwe, Mali, Somalia, the Central African Republic and Eritrea is close. These countries would each receive 50.000 tons of free grain from Russia. All in all, Putin offered few clues that indicate that the Kremlin seriously intends to back the grain deal again.
Rain rise
Although the stock exchange was closed in Chicago, that does not mean that there was no news. The weather reports continue to concern the American corn and soy trade. The dry second half of August has reduced the yield potential of corn, and even more soy. The ten-day forecast includes precipitation for the central US. However, the precipitation continues to the east of the cornbelt past. It's late in the growing season, but rain in September can give soybean a boost.
In the Southern Hemisphere, and specifically Australia, drought is also becoming a problem. Several traders and analysts expect wheat and barley yields to be further reduced. In June, the Australian Department of Agriculture announced that it expects the grain harvest to be approximately one-third lower compared to last season, just slightly below the ten-year average. The weather phenomenon El Niño (which, among other things, causes drought in Australia) is gaining strength, which is why concerns about the Australian grain harvest increased among market players.