Analysis Grains & Commodities
The grain market is full of contradictions
It is a repetition of moves in the grain market. The weather in America remains an important factor. It remains dry in Brazil, while Argentina and the US finally had rain. In Europe, eyes are mainly focused on the Black Sea region. Unrest about the export routes keeps market players busy, but whether they actually act on it...
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Choose the subscription that suits youThe December wheat contract on the Matif closed yesterday €0,75 higher at €232,25 per tonne. On the CBoT, wheat also showed a cautious plus of 0,7% to $5.65½ per bushel. Soy just edged past that, closing 1% higher at $13.04 per bushel. Corn ended lower last trading session, closing 1,1% lower at $4.70 per bushel.
The wheat market lacks the impetus to really initiate a movement. The Black Sea region dictates the mood. Earlier this week, Ukraine accused Russia of sabotaging the humanitarian corridor. That does not make grain traders any more confident that Ukrainian exports will continue as smoothly. In October, Ukraine exported 3 million tons of grain, according to traders' estimates. According to the latest figures from the Ukrainian Ministry of Agriculture, the country exported 2,3 million tons in September. If the figures are correct, the new route will have a positive effect on export capacity.
Russia is struggling a bit with the role it plays in the wheat market. On the one hand, the Kremlin wants to raise the price. That is difficult to combine with smoothly exporting large volumes. In that sense, the unrest that is now being created around Ukrainian exports is not bad for Russia. We should note that it was Ukraine itself that came out with the news about the sabotage of the sea route.
Redemptive rains
The Buenos Aires grain exchange has revised downwards its winter wheat harvest forecast. The exchange now estimates the harvest at 15,4 million tons compared to 16,2 million tons in the previous forecast. After almost four years of drought, the weather is finally turning in Argentina. The vast majority of soy is sown in Argentina in November and December. Due to the rain in recent weeks, the starting position is a lot better than in recent years. And more rain is in store. In Brazil (except for the south), drought is becoming a problem. After record harvests of corn and soy, the prospects for the new crop cycle are much less positive. This provides support in the soy market.
In the US, recent precipitation on the southern prairies is now also reflected in the drought monitor. The red areas have not yet completely disappeared from the wheat belt, but the picture in the Crop Progress report from earlier this week that winter wheat in the US is off to a good start is confirmed.
