The war between Russia and Ukraine has taken another step on the escalation ladder. Ukraine deployed British long-range missiles yesterday and Russia responded today by using an intercontinental ballistic missile. The availability of wheat is a concern. Harvesting is underway in the southern hemisphere and supply from there could slow any rally. Brazil and China, meanwhile, are tightening ties and announced a new trade agreement yesterday.
The December wheat contract on the Matif closed yesterday €1,75 higher at €219,75 per tonne. On the CBoT, grains also closed in the green. Wheat closed 0,5% higher at $5.52½ per bushel. Corn gained 0,7% to $4.30¼ per bushel. Corn took a step back to close 0,8% lower at $9.90½ per bushel.
After the American-made Atacms missiles, Ukraine yesterday deployed the British Storm Shadow long-range missiles against Russia. The Kremlin fired an intercontinental missile at Ukraine for the first time today, according to the Ukrainian air force. Concerns about the consequences of the war on the grain market are thus increasing again. However, the consequences for the transport of grain from the Black Sea region remain limited for the time being. According to various analysts, this can explain why the war premium on wheat is not being increased much further.
Algeria has bought 160.000 to 180.000 tons of durum wheat, according to sources. The price is said to be between $348 and $360 per ton C&F. The durum wheat comes from far away. Australia, Canada and the US are mentioned as countries of origin.
Offer from the south
Tight wheat supplies are providing a fairly solid base for the wheat market. The fact that the wheat price is hovering around its lowest level in four years is not motivating growers to quickly part with what wheat is in the silos. However, that does not automatically mean that the wheat price will rise. The wheat harvest has started in the southern hemisphere. For the main wheat exporting countries below the equator - Argentina, Australia and Brazil - the USDA predicts a wheat harvest that is 18% higher than last season. The supply of wheat during the harvest could nip any price rallies on the world market in the bud.
Relationship Management
Brazil and China are strengthening ties even before Trump is in the White House. Yesterday it was announced that Brazil has a new trade agreement with China for fresh grapes, fishmeal, sesame seeds, sorghum and other products. Grains or soy are not mentioned, but the discerning reader can deduce from this the direction in which Chinese trade policy is being steered.
Last October, China imported 541.400 tons of soybeans from the US, according to Chinese customs data. That is double the amount in October 2023. Compared to the 5,5 million tons from Brazil and 1,4 million tons from Argentina, the US was only a small player on the Chinese market in October. In the first ten months of 2024, China imported 15,1 million tons of soybeans from the US, 13% less than the same period a year earlier. Brazil exported 67,8 million tons, 14% more to China.