Markets do not like uncertainty, it is said. That was confirmed yesterday. Volatile, that is what we can rightly call the past trading day. What exactly Trump will do and what influence that will have on the agricultural markets is difficult for traders and analysts to estimate. Various theories are doing the rounds.
The December wheat contract on the Matif closed yesterday €2,50 higher at €216,50 per tonne. On the CBoT, grains finally recovered their losses from earlier in the trading day. Wheat and soybeans saw gains limited to ¾ cents. That brought wheat to a close of $5.73¼ per bushel and soybeans to $9.94½ per bushel. Corn made a bigger move, closing 1,9% higher at $4.26¼ per bushel.
The outcome of the US elections dominated the news on the grain market. Will Trump start a trade war with China if he is in the White House, and if so, what countermeasures will Beijing implement? Players on the financial markets do not know either. Friend and foe agree that China has agricultural commodities in its sights.
Trump will be sworn in on January 20. Some analysts have speculated that China could use the period between the election and the inauguration to do another round of buying in the US. Another theory is that China could use US agricultural products to reduce its trade surplus with the US by importing more from the country, thereby averting a trade war. Although China is better prepared than it was eight years ago when Trump first became president, Beijing is keen to reach a deal with the US at the negotiating table.
Speculation
The rise in grains last trading session was mainly driven by speculation, according to several analysts. Import duties and tax cuts, such as those planned by Trump, are usually a driver of inflation. Taking a position in commodities is a tool for investors to hedge against inflation.
The trade is also taking a position in the run-up to the Wasde report that will be released next Friday evening Dutch time. That corn is making a jump is remarkable. The American corn harvest is relatively large due to good yields.
Russia's export rate unsustainable
SovEcon released new figures on Russian wheat stocks yesterday. The market bureau estimates the wheat stock on October 1 at 38,7 million tons. This means that the stock is 17% smaller than last season on this date, mainly due to a smaller harvest and large exports. According to SovEcon, 15 million tons of wheat were exported by Russia from July to September. The current export rate cannot be maintained for the rest of the season, SovEcon writes.