Peace negotiations between Ukraine and Russia continue to preoccupy players in the grain market. The US is increasing pressure on both the Kremlin and Kyiv. The grain market is apparently sensitive to this. Meanwhile, the Ukrainian farmers' union UAC is raising the alarm that Russia's recent attacks are disastrous for Ukrainian grain exports.
The March wheat contract on the Matif closed yesterday down €0,50 at €185,25 per tonne. That's the lowest closing price since early September. Wheat also took a hit on the CBoT during the last trading session, closing down 3 cents at $5.06 per bushel. Corn, however, closed higher on the Chicago exchange, up 4 cents to $4.40 per bushel. Soybeans fell 4 cents to $10.58 per bushel.
Sufficient supply and moderate demand remains the prevailing narrative for the wheat market. This doesn't seem likely to change anytime soon. Where is the bottom? That's a question many analysts are asking.
The USDA certainly didn't do the mood any good yesterday. The department announced that China's order for 132.000 tons of wheat in the US had been canceled. It hasn't been officially confirmed, but several sources write that China likely canceled the more expensive US wheat and instead secured cheaper Argentine wheat.
Progress
Peace negotiations are underway between Ukraine and Russia. The future of these negotiations remains difficult to assess, but they appear to be getting serious. The US is reportedly considering a sanctions package against Russia if the Kremlin continues to reject all attempts to reach a peace deal, according to Bloomberg. The White House is reportedly backing a security guarantee for Ukraine similar to NATO's Article 5 (an attack on one is an attack on all). However, the Russian-occupied territories in eastern Ukraine remain a sensitive issue, and according to sources, there is still no immediate solution.
Although players in the wheat market are lowering their war premiums somewhat, Ukrainian exporters are having great difficulty shipping their wheat. This is the warning from the Ukrainian farmers' union UAC. Due to the attacks on port terminals and power plants, these facilities are operating at limited capacity. Some terminals on the Black Sea are completely shut down, while others are operating at 20% capacity, the UAC writes. In the first half of December, 359.150 tons of wheat were exported out of the 1 million tons contracted/sold, according to the UAC. "Traders don't know what to do. It's dangerous to store grain in the port, and logistics are not running smoothly. There are constant power outages and problems with the trains."
This season, Ukraine exported 13,8 million tons of grain, compared to 19,4 million tons during the same period last season, according to new figures from Ukrainian authorities. Wheat, at 7,6 million tons, is the most important export product this season.
Blizzard
In the US, the weather is causing some inconvenience, with a snowstorm on the northern prairies. However, the cold conditions are not expected to cause problems with wintering wheat. In fact, temperatures are expected to rise above average across most of the US towards the weekend. Drought on the southern prairies, particularly in Kansas and Oklahoma, could provide some support for the wheat market, according to some experts.