The mood on the wheat market was somewhat depressed, despite news that Russia is tightening export quotas before they are even fully in effect. German farmers have now sown considerably more winter wheat compared to a year earlier. Players in soy are mainly concerned with what is happening in China. State buyer Sinograin shows a preference for soy from the US.
The March wheat contract on the Matif fell a step last Friday, down €2 to €227 per tonne. On the CBoT, wheat was unchanged at $5.53 per bushel. Corn rose 1,3% to close at $4.46¼ per bushel. Soybeans lagged slightly behind corn, closing 1,2% higher at $9.76½ per bushel.
The mood is not getting better on the wheat market, although there is a reason for it. Russia announced that it will reduce the export quota for the period February to June, from 11 to 10,6 million tons. By allowing less wheat exports, the Kremlin hopes to keep prices on the domestic market under control.
Russia is struggling with sky-high inflation. The official inflation figure for November was 8,9%. In October, the Russian Central Bank raised interest rates by 200 basis points, to 21%. At its meeting last Friday, it was decided not to raise interest rates any further.
More area in Germany
Due to relatively favourable weather last autumn, German farmers were able to sow more winter grain. According to preliminary figures from Destatis, the German statistical office, the area of winter grain has increased by 5,6% - compared to the previous season - to 4,8 million hectares. The largest increase is mainly in winter wheat. With 2,8 million hectares, there is 12% more winter wheat compared to last year.
This increase is not unexpected. Last autumn it was extremely wet and farmers did not get the chance to sow wheat. According to preliminary figures from Destatis, the area of rapeseed is 2,3% larger and amounts to 1,1 million hectares. The growth in the wheat area in Germany is slightly larger than in France. According to the French Ministry of Agriculture, French farmers sowed 9% more wheat compared to a year earlier.
Demand for American soy
China is giving some unusual signals for the soy market. In November, China imported 25% less soy from Brazil compared to the same month a year earlier. This is evident from figures from Chinese customs. More soy was imported from the US, namely; 2,79 million tons. Last year, that was 2,29 million tons. Importers may be anticipating possible trade barriers when Trump takes office. In total, China imported 2024 million tons of soy in calendar year 97,1. This puts the country on track for a record import.
Another striking piece of news is that the Chinese state buyer Sinograin has bought 500.000 tons of soy in the US for delivery in March and April. Sinograin prefers (according to insiders) soy from the US over soy from Brazil. This is because of the quality. Sinograin fulfills a bit of a stock manager role in China. Storage is therefore an important factor for the state-owned company. According to sources, this explains why Sinograin pays about $1 per bushel more for soy from the US, compared to soy from Brazil.