Analysis Grains & Commodities
Interest encourages Russian farmers to cash in on grain
Grain traders in the US and Europe are not entirely on the same page. Despite unspectacular export figures, wheat in Paris seems to have reached a temporary low. Rain on the southern prairies of the US put wheat under pressure in Chicago. Russian farmers are rushing to cash in their grain this season. High interest rates make savings banks a better alternative than speculating on higher prices.
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Choose the subscription that suits youThe December wheat contract on the Matif closed yesterday €1,25 higher at €210,75 per tonne. On the CBoT, wheat took a step back for the fourth day in a row, closing 2% lower at $5.30¼ per bushel. Corn also took a hit, losing 1,8% to $4.19 per bushel. Soybeans, like corn, closed 1,8% lower. The November soybean contract closed at $9.85¾ per bushel.
The wheat market continues to search for the bottom. In Europe, we seem to have found it for the time being. Despite reports of disappointing French grain exports from FranceAgriMer, the Matif showed some recovery yesterday. According to Strategie Grain, this will not be the season of record exports. Compared to last season, the market agency expects a sharp decline in exports. European wheat has become somewhat more attractive on the world market, but is still losing out to wheat from the Black Sea region.
The drought monitor clearly shows the rain of last week on the southern prairies in the US. The deep red spots in the north of Texas, Oklahoma and Kansas are getting smaller and according to the weather reports more rain is coming. Analysts more or less expect the condition of winter wheat to improve further. Drought remains a problem on the northern prairies. However, there spring wheat has the upper hand and analysts are not yet so worried about negative consequences for potential yields.
According to some experts, Trump's peace plans for the war between Ukraine and Russia also hang over the wheat market. We know that Biden supports Ukraine and reasons that we should continue to support Ukraine for as long as necessary. Trump has a different view. He wants peace and, perhaps even more importantly, does not want to spend a lot of money on the foreign war. Any deal will not be a pretty deal. Something like 'Ukraine gets the Donbas back, but Russia keeps Crimea and Ukraine is not allowed to become a member of the EU or NATO' is mentioned as a possible outcome of peace negotiations. This could restore peace in the Black Sea region and make the export of grain easier again. Whether the ball really rolls in that direction, we still have to see. The first months of the current export season were good for both Ukraine and Russia and several analysts openly wonder what will be left for the second half of the season.
Bank yields more than saving
According to the Reuters news agency, Russian farmers are not delaying the sale of grain. The reason for this is the very high interest rates in Russia. The Russian Central Bank recently raised the interest rate to 21% to curb inflation and cool down the war economy. The official inflation figure is 9,8%. The interest rate on short-term deposits can rise to 25%. It is easier to sell grain immediately and put the money in the bank at more than 20%, according to the director of Ikar. According to the head of the market agency, this is also the reason behind Russia's large exports. "This year there is no reason to hold on to the grain any longer."