The Kremlin has given a clear hint that it will tighten Russian export quotas on wheat if yields in Russia disappoint. It is precisely the large supply of relatively cheap Russian wheat that is putting pressure on the world market. In world trade, the import duties and the uncertainty surrounding them continue to preoccupy people's minds. Incidentally, Trump's import duties are not a problem for everyone. Brazilian soybean growers actually benefit from them.
The March wheat contract on the Matif closed down €6 last Friday at €205 per tonne. Incidentally, the May contract, which is the most traded, closed at €221,75 per tonne. On the CBoT, wheat closed down 0,6% at $5.33¾ per bushel. Corn closed higher, up 1,2% at $4.55¼ per bushel. Soybeans closed down 0,4% at $10.10¼ per bushel.
From Russia came bullish news for the wheat market. The Russian news agency Tass reports that the Kremlin is considering measures to limit wheat exports, if the upcoming wheat harvest is lower than expected. "The government will quickly initiate the introduction of additional non-tariff measures, if bad weather causes yields to fall short," Tass quotes from a statement by the Russian Ministry of Agriculture.
It is not unusual for Russia to work with export quotas that are tightened or expanded again towards the end of the season. Earlier in the season, it was a large supply of Russian wheat that put pressure on prices on the world market. Partly because of this, exports went well in the first half of the season. As we stand now, the global wheat stock would be the smallest in nine years at the end of the export season in July.
Call to Trump
International trade relations remain a major issue on the grain market. It can change by the hour or so, but as things stand now, there will be no US tariff on products from Mexico and Canada that fall under USMCA (the successor to NAFTA). Only on April 2 – April 1 could give a wrong impression according to Trump – will the much-discussed 25% tariff come into effect.
Farmers in North America are getting a breather. The agricultural sectors in Canada, the US and Mexico are to some extent interdependent. For example, the US imports approximately 85% of its potash from Canada. The country is a major buyer of American biofuel. Mexico is a major buyer of American corn and exports its fruits and vegetables to the US. The uncertainty caused by the introduction and non-existence of trade barriers is not good for farmers' confidence, let alone their wallets. This has not gone unnoticed by a group of senators. "At a time when farmers are operating on razor-thin margins due to low commodity prices and higher input costs, the chaos and uncertainty of these tariffs threatens their livelihoods. In addition to making it harder for farmers to sell their products, these tariffs make it harder for Americans to put food on the table," write a number of senators from Illinois in a brief to Trump. "Farming families should not be the unintended victims of an unnecessary trade war."
Forgotten Battle
Slightly overshadowed by all the attention Trump is getting is the trade tension between China and Canada. Last year, Canada imposed a 100% tariff on electric cars and 25% on steel and aluminum from China. China responded with anti-dumping measures against Canadian canola and a complaint to the World Trade Organization (WTO) about Canada’s trade restrictions. Now Beijing is threatening to impose tariffs on canola oil, pork and seafood if Canada is tempted to escalate the trade war.
While the US has import duties hanging over the market, Brazil wants to abolish import duties on various basic foodstuffs. Brazilian President Lula da Silva feels compelled to do so in order to get the high inflation under control. This high inflation is certainly not doing Lula's popularity any good. Import duties are being abolished for beef, corn, sunflower oil and sugar, among other things.
Where two dogs fight...
Brazilian soybean growers can send Trump a thank you. With tariffs hanging over the market for US soy, buyers are willing to pay a hefty premium for Brazilian soy. Cepea, an agricultural economics institute, has calculated that the premium on Brazilian soy has risen from 50 US cents in February to 85 cents in March. That is the highest monthly premium since 2022. For the week up to and including March 6, Cepea calculated a Brazilian soybean price of 135,72 reais per 60-kilo bale. Converted, that is approximately $10,63 per bushel.
A large part of the soy in Brazil has now been threshed, namely 36,4% compared to 38% last year this week. Cepea is cautious about the yield forecast for soy that is still fixed. Due to the dry weather in Brazil recently, the harvest could well be lower according to the institute.