Lower demand for grains on the global market is drawing attention to the grain market. In China, investor confidence is being tested by the problems at real estate company Evergrande. This also has an indirect effect on the grain market. With the current wheat price, Egypt does not consider it necessary to implement measures against high prices. Despite this, wheat trading in the local market was halted due to speculation.
The March wheat contract on the Matif closed yesterday €1 lower at €213,75 per tonne. That is the lowest level in two months. On the CBoT, prices also closed lower. Wheat lost 1,1% to $5.93½ per bushel. Corn fell 1,3% to $4.40¼ a bushel. Soy was between wheat and corn, closing $1,2 lower at $11.94¼ per bushel.
Sufficient supplies, favorable weather in South America and disappointing demand for grains are, according to analysts, the factors determining the mood on the grain market. The weak demand is largely related to the ailing economy in China. Chinese real estate giant Evergrande must sell assets by a judge in Hong Kong to meet its obligations to investors. The company's liquidation could mean another setback for China's already faltering economy. Evergrande has more than €300 billion in debt. Previous attempts to revive the troubled company have failed. Foreign investors have therefore gone to court to get part of their money back. They have now been proven right in Hong Kong, but the island has a separate status within China and it is not said that the verdict will be adopted by judges on the mainland. In any case, the confidence of foreign investors is not improving. Foreign financiers are desperately needed to get the Chinese economy going.
No additional measures
Egypt is not going ahead with plans to hedge against higher wheat prices. Egyptian Minister of Supply Ali El-Mosilhy told Bloomberg. "Current wheat prices have fallen to a level close to prices before corona and the war between Ukraine and Russia." Egypt has given signals in recent years that it wants to hedge against high wheat prices. The country is dependent on subsidized wheat to feed its population. Egypt is a major wheat importer, importing 6,5 to 7 million tons of wheat, according to El-Mosilhy. The current stock is sufficient for 4,2 months according to the minister. Despite the soothing words, wheat trading on the Egyptian stock exchange has been temporarily halted. The price rose too quickly due to speculation, according to the minister.
Maritime data agency Kplker sees the consequences of the unrest in the Red Sea reflected in transport movements. According to Kpler, 63% less grain is transported via the Suez Canal in January compared to the same month last year. This month, 2,4 million tons will pass through the Suez Canal, compared to 6,4 million tons in January 2023 and 6,6 million tons last December. This week it was confirmed that sixteen ships have chosen an alternative route. The majority of the ships are on their way to China or other countries in Asia.
Rain in Brazil puts pressure on soy prices
In soy and to a lesser extent corn, rain in Brazil provides air on the market. Analysts expect that soy that is still stable will not deteriorate further and that yield forecasts will not be further reduced as a result. It should be noted that, for example, the yield forecast of the USDA is called far too high by Brazilian farmers' organizations. Safras & Mercado reports that 9% of Brazil's soy area has been harvested compared to 4,4% this time last year.