The European wheat trade seems less impressed by the developments in the war between Russia and Ukraine than their American colleagues. What Russia will do after the first attack by Ukraine with Atacms missiles on Russian territory is unclear. Russian grain growers have problems of a different order. They see that their margins are under severe pressure and with a dry autumn they find the risk of sowing winter wheat very high. In doing so, grain growers are going completely against Putin's ambitions to make Russia an agricultural superpower.
The December wheat contract on the Matif was unchanged yesterday at €218 per tonne. On the CBoT, wheat closed 0,5% higher at $5.49¾ per bushel. Corn took a step back, closing 0,5% lower at $4.27¼ per bushel. Soybeans fell more sharply, closing 1,1% lower at $9.98½ per bushel.
In Chicago, wheat traders are more nervous about the war in Ukraine than in Paris, is the picture that emerges after the past trading day. Ukraine used the American Atacms missiles for the first time yesterday. The target was an ammunition depot in Bryansk, which is approximately 110 kilometers from the Ukrainian border. Last weekend, the American president gave Ukraine permission to use these long-range missiles on targets far inside Russia.
Because these are American missiles, Russia could interpret this attack as an attack by NATO on Russia. How the Kremlin will respond to the attack is not yet clear. Incidentally, the US announced today that it will not open its embassy in Kiev for fear of a retaliatory attack by Russia on the Ukrainian capital.
Downward trend
Putin has the ambition to make Russia an agricultural superpower. With this, the Kremlin wants to gain more international influence now that the country is confronted with Western sanctions because of the invasion of Ukraine. By far the most important agricultural export product of Russia is wheat. However, the Russian harvest shows a downward trend. After the record of 104,2 million tons of wheat in 2022, the harvest in 2023 came to 92,8 million tons and according to preliminary estimates 83 million tons of wheat were harvested last harvest.
The upcoming harvest could be even lower, Reuters news agency reports based on sources in Russia. The wheat price is too low for Russian farmers to earn anything from wheat. "Every ton of wheat is lost. The sales price does not cover the costs," Arkady Zlochevsky, director of the Russian Grain Union, told Reuters. Last season there was frost in late spring, followed by a dry summer and in some regions there was flooding during the harvest. Due to high costs for machinery and fuel, rising export duties, high interest rates (the Russian central bank's advisory rate rose to 21% in October) and the phasing out of agricultural subsidies, the margins of wheat growers are under pressure. "The wheat price has remained almost the same between 2022 and 2024, while the costs of grain production have increased by at least 28%," Sergei Lisovsky, MP for the Kurgan province, told Reuters.
The dry weather this fall is certainly not giving farmers an incentive to grow winter wheat. According to some analysts, growers are waiting to see what wheat prices will do in the coming weeks. Others see a trend that Russian arable farmers are more inclined to grow niche crops such as peas or sunflowers. For farmers who are struggling, falling margins are more important than the status on the world stage that Putin values.
Soy grows well in South America
Soybeans were under pressure during the last trading session due to relatively favourable weather in South America. The showers of the past few days have passed by the south of Brazil and the centre of Argentina. Favourable for the agricultural work, but less favourable for growth. Rain is forecast for these areas in the coming days and the soybeans can profit from this to the maximum. The Brazilian Abiove increased the yield forecast for the upcoming soybean harvest to 167,7 million tonnes. However, this is slightly behind the USDA forecast that estimated the harvest at 169 million tonnes earlier this month.