Military display makes grain market nervous

The March wheat contract on the Matif closed yesterday up €0,50 at €190,50 per tonne. On the CBoT, grains took a step back. Wheat closed 6 cents lower at $5.13 per bushel. Corn fell 7 cents to $4.42 per bushel. Soybeans were the biggest loser, falling 9 cents to $10.49 per bushel.

The peace talks between Ukraine and Russia are having a different impact on the European and American grain markets. Last weekend, Zelensky visited Trump, and American traders saw the positive signs. Yesterday morning, Trump spoke with Putin by phone. According to several analysts, little came of that. Russia accused Ukraine of attacking one of Putin's country residences. Trump expressed his disgust at this. Ukraine dismissed the Kremlin's statements as Russian propaganda.

Meanwhile, Russian grain exports are struggling. SovEcon expects Russia to export 4,2 million tons of wheat in December, compared to 4,8 million tons a month earlier. The price of Russian wheat is also under some pressure. Market bureau Ikar lowered the price by $1 to $226 per ton.

In Europe, the market seems less influenced by developments in the Black Sea region. However, that doesn't mean there's much room to the upside. Significant wheat stocks were already hanging over the market, and with good harvests in Australia and Argentina, the situation for sellers isn't improving.

Tensions between China and Taiwan are rising due to a major Chinese military exercise near Taiwan. According to experts, China wants to demonstrate with the exercise its ability to blockade Taiwan's strategic port cities. The US arms sales to Taiwan are a thorn in Beijing's side. This is certainly not helping the already considerably cooled relationship between China and the US.

China is using soybeans more or less as leverage against the US. Significant volumes of soybeans flowed from the US to China, but since the trade war, that volume has fallen considerably. Yesterday, the USDA announced the sale of 100.000 tons of soybeans. The buyer was Egypt. China is keeping a low profile on the US market.

Instead of the US, China prefers soybeans from South America. The Brazilian harvest looks set to be good. It's currently dry in key soybean-growing areas in Brazil, but rain is forecast for next week. Some analysts are more concerned about the expected soybean yields in Argentina. It's dry in the south of the country, and according to weather forecasters, this is unlikely to change in the near future.