Markets don't like uncertainty. That statement applied to the grain market last trading session. The cause of the uncertainty is Argentina, where the new government has turned a leaf on a tree when it comes to export duties on grain. Furthermore, the grain market remains a weather market with a windfall in the US and a word of warning from France.
The March wheat contract on the Matif gave up €3,75 yesterday, closing at €227,50 per tonne. At the CBoT, wheat took a bigger step back. The March contract closed 3,2% lower at $6.05¼ per bushel. Corn fell 1,2% to $4.79½ a bushel. Soy also closed 1,2% lower at $13.07½ per bushel.
Conflicting reports from Argentina have taken hold on the grain market. There is a lot of controversy with both wheat and corn about the export taxes that the Milei government does or does not impose. On Tuesday during the presentation of the economic policy, there was talk of completely abolishing export duties. Yesterday, Milei made a U-turn and now an increase in the levy is on the table. For corn and wheat, the export tax would be increased from the current 12% to 15%. The devaluation of the peso will give Argentine grain exporters a boost. This gives the government room to collect additional taxes to balance the budget. According to the Minister of Economic Affairs, the increased export tax is an emergency measure that can be scrapped when calm has returned. The levy for soy is 33% and will be left unchanged for the time being.
Economic stimulus
According to the Bahia Blanco grain exchange, with the removal of regulated currency trading and export duties, Argentina's wheat production could increase by 60%. This is comparable to eight years ago when then President Macri took similar measures. The increase is stronger because Argentina is coming out of very dry years. With the transition from La Niña to El Niño, growing conditions improve.
In the US, wheat is under additional pressure due to the weather reports. Rain is forecast for the southern prairies in the US. This builds up moisture in the previously dry winter wheat growing region. FranceAgriMer has increased its European export forecast for wheat to countries outside the EU to 10,2 million tonnes. That is 100.000 tons more than last month's forecast and is mainly due to additional demand from China. According to FranceAgriMer, France exports 6,69 million tons within the EU against 6,79 million tons in the November forecast. That is 4,8% more than in the 2022/23 season. For the 2024 harvest, FranceAgriMer once again expressed concerns about the wet autumn. As a result, less winter wheat has been sown, according to the agency.