Analysis Grains
Russia prices European wheat out of the market
In Europe, the wheat market is currently not experiencing major shifts. According to some analysts, this should happen in order to compete with Russia. The minimum prices set by the Kremlin together with the exporters are not being adopted by the market. In the slightly longer term, the available export stocks at various major players could attract more attention.
The December contract for wheat on the Matif closed $0.50 higher at $216.25 per ton yesterday. On the Chicago exchange, grains took a step back. Wheat was the biggest decliner, closing 1.2% lower at $5.65½ per bushel. Corn's loss was limited to 0.2%, closing at $4.30 per bushel. Soybeans closed 0.5% lower at $10.11¾ per bushel.
Russia remains the price fighter in the wheat market. Market bureau Ikar lowered the price for Russian wheat by $5 to $228 per ton. This is well below the minimum price of $245 per ton agreed upon by the Russian Ministry of Agriculture together with the exporters. The price reduction did not really help Russian exports last week. According to SovEcon, Russia exported 770,000 tons of grain last week, of which 720,000 tons were wheat. A week earlier, Russia exported 1.2 million tons of grain, including 1.12 million tons of wheat.
Advantage of a weak euro
The fact that wheat in Paris held up relatively well - especially when compared to the decline in Chicago - is mainly attributed by analysts to the drop in the euro. The European currency fell to its lowest level since November 2022. The lower exchange rate is a stimulus for European exports. If Europe wants to compete with Russian wheat in the major markets in North Africa and the Middle East, the European wheat price may need to take another step back.
An additional uncertain factor in the wheat trade is what Trump will do regarding the war between Ukraine and Russia. If the American president manages to get both parties to the negotiating table and sign a ceasefire or even a peace treaty, grain exports from both countries could receive a boost, according to some experts.
Export lead
Another group of analysts points out that both countries have already exported relatively large amounts of grain. Since the start of the export season on July 1, Ukraine has exported 15.3 million tons of grain, according to the new figures from the Ukrainian Ministry of Agriculture. This represents a 52% increase compared to last year. More than half of Ukraine's grain exports, nearly 8 million tons, are wheat. This marks a 60% increase in wheat exports compared to the previous season. APK-Inform keeps the grain harvest forecast in Ukraine steady at 52.5 million tons. Of that harvest, 37.3 million tons are available according to the bureau, compared to 51 million tons exported in the previous season. Relatively tight stocks were also mentioned in the Wasde report last Friday. The final wheat stocks at various major exporters are at their lowest levels in decades.
While the grain market in Europe receives some support from currency fluctuations, American exporters are facing challenges due to a strong dollar. The US dollar reached its highest point in four months. American grain, especially wheat, was already relatively expensive on the world market and is now becoming even more expensive for countries outside the US. Furthermore, wheat was under pressure due to rainfall on the US prairies. Drought in the US winter wheat area is dissipating as a result, and the rain is beneficial for the development of winter wheat in the country.
In corn and soybeans, various speculators took profits in the last trading session following last week's rally, according to several analysts. The slightly negative sentiment was further reinforced by a drop in oil prices. This is mainly due to concerns about weak demand from China. The faltering economy there is once again fueling speculation about the consequences of a possible trade war with the US.
