America once again caused quite a stir in the grain market. New sanctions announced by Trump against two Russian oil companies also had an impact on the grain market. The record wheat harvest predicted by the IGC did not dampen the mood. And then there's the rumor going around that China has bought 1 million tons of soybeans from the US.
The December wheat contract on the Matif remained unchanged yesterday at €189,75 per tonne. On the CBoT, wheat saw a significant increase, closing 9¼ cents higher at $5.13 per bushel. Corn was also in the green, up 5 cents to $4.28 per bushel. Like grains, soybeans also traded higher, up 10 cents to $10.44¾ per bushel.
US President Trump announced new sanctions yesterday against Russian companies Rosneft and Lukoil, two major players in the oil market. The sanctions will likely force refineries in China and India to seek alternative suppliers. If they continue to do business with the Russian companies, they risk being excluded from the international banking system. The big question is whether these refineries are willing to take that risk, or whether they expect Trump to finally take action.
Analysts say the effect of the oil market's rise following this news also impacted grain prices. This is partly because international trade flows are expected to be disrupted, and higher oil prices are expected to benefit biofuel production. The sanctions also clearly demonstrate that Trump's patience with Putin is wearing thin. Trump sees himself as the ultimate dealmaker. After his Middle East adventure, he now reportedly wants to force a breakthrough in the war between Ukraine and Russia. Putin, however, has different ideas about that.
More rain on the way
The weather is another factor contributing to a somewhat more positive mood. The storm forecast for yesterday ultimately turned out to be less severe, but more rain is on the way, according to reports. Winter wheat sowing will be slow in Europe next week, if the weather forecasters are correct.
We can conclude that market players paid little attention to the International Grains Council (IGC) forecast. The wheat harvest forecast was increased by 8 million tons to 827 million tons. This means the harvest is 1,1% higher than last season and will reach a record size. The IGC estimates higher yields for Russia, the US, and Argentina, among others.
China entering the market after all?
A rumor is circulating on the soybean market that China has purchased 1 million tons of soybeans from the US. Several analysts question the rumor's reliability. However, its veracity is difficult to verify in the short term. Normally, such transactions are verified by the USDA. However, due to the US government shutdown, this branch of the US Department of Agriculture is closed.
However, US growers are in no hurry to sell soybeans. They're betting that a deal will be reached between China and the US, which will lead to better prices, or that the US might introduce an additional support program. Another factor is that growers expect the soybean price to remain stable.
Experts expect the volatility in the soybean market to remain high. China and the US are still in talks over the terms of mutual trade. Next week, Trump and Xi will meet in South Korea to discuss this. Analysts expect Russia and Ukraine will also be topics of discussion, partly due to the new US sanctions. Trump now wants to project confidence that a deal will be reached, but the more issues are raised, the greater the chance they will fail to reach an agreement, some sources say.