Ukraine optimistic about grain export routes

The closing price of wheat on the Matif gives a somewhat distorted picture at the moment. The September contract closed €4 higher yesterday at €219,50 per tonne, but it is about to expire. The December contract, which sees the most trading, closed €1,25 higher at €238,50 per tonne. On the CBoT, the December wheat contract took a step back to close 1,5% lower at $5.99¾ per bushel. Corn moved mostly sideways last trading session, ending 0,1% higher at $4.86¼ per bushel. The November soybean contract closed 1,1% lower at $13.59½ per bushel.

According to analysts, the raw materials market and therefore also the grain market in the US was hit yesterday by the increasing diplomatic tensions between China and America. China announced that it will restrict the use of iPhones in government buildings and companies in which the Chinese state has an interest. Civil servants and employees are no longer allowed to use the iPhone for work-related matters. However, it does not come as a surprise that China would respond to the American export restrictions on (advanced) semiconductor technologies. What makes players in the grain market a bit nervous is how things will proceed, especially in light of China's somewhat weak economic performance.

Multiple roads
Of course, on the wheat market you cannot ignore the war in Ukraine. On Thursday morning there was another drone attack by Russia on the port of Izmajil, which resulted in one death and caused considerable damage to a storage building. The Ukrainian Association of Grain Exporters expects that capacity can be increased to 30 to 35 million tons of grain via the Romanian port of Constance, APK Inform reports. That is an optimistic estimate if you look at the 8 million tons that were exported via this route in the first half of this year. By the way, Ukraine does not bet on one horse. Various sources report, based on information from the Ukrainian Ministry of Foreign Affairs, that exports are now also being exported via Croatian ports. The volumes involved are not stated. Yet another alternative is export by rail to the Baltic Sea, but according to traders this is the most expensive option and is therefore not very popular.

John Neal, the chief executive of Lloyd's of London, told Reuters in an interview yesterday that talks were underway about insurance should the grain deal resume. "Are we happy and able to continue to provide insurance in the event that a corridor can be reopened and redesigned? The answer to that is yes," Neal told Reuters. Whether shipowners can insure their ships is of great importance if the Black Sea grain deal is somehow revived.

Drought is getting worse
Drought remains a major problem in the US. This week the USDA already lowered the condition of corn and soy due to a lack of precipitation and if you look at the new drought monitor that came out last night Dutch time, the crops are certainly not improving. The dry weather is favorable for the grain harvest in Canada. In the province of Saskatchewan, half has been harvested compared to a third in the ten-year average for this time.