Analysis Grains
Trump continues to cause uncertainty in grain market
Relatively favorable weather in the EU and North and South America and a rise in the dollar weighed on grain prices. The fact that it is dry in Ukraine, Russia, and Kazakhstan remains somewhat overlooked, even though the first two are major players in the world market. The relationship between China and the US continues to be a topic of discussion. Now it was a top executive of a Chinese state-owned company who shed light on the soybean demand from China.
The December contract for wheat on the Matif closed €5.25 lower at €209.25 per ton yesterday. Wheat also took a step back on the CBoT and closed 2% lower at $5.41 per bushel. Corn also ended in the red, but the loss was limited to 0.5%, bringing the closing price to $4.26½ per bushel. The November soybean contract showed a small increase and closed ¾ cent higher at $10.04¼ per bushel.
For the EU, weather models are leaning towards slightly wetter weather, but - apart from the extreme showers in Spain - not extreme. In the Midwest and the southern prairies in the US, where it was dry, rain has fallen in recent days and more is on the way. The market is already anticipating the US drought monitor and it is expected that the red spots on the map will decrease this week. A mix of showers and dry periods is forecasted for South America. These are favorable conditions for the development of newly sown soybeans and corn. However, it is noted that the rainfall will pass by a part of the South of Brazil and the west of Argentina.
Drought in the East
There is little attention for the drought in Ukraine, the west of Russia, and Kazakhstan. For the next ten days, there is no significant rain forecasted for that area. Winter wheat there is already moderately developed and cannot make up for the lack of moisture as we saw in the US last week. Moderately developed wheat is more susceptible to winterkill if temperatures really drop.
In October, Russia exported 11% more grain by sea compared to the same month last year, according to some sources. A total of 6.3 million tons of grain left by sea vessel in October. Since the beginning of the season, 2.1% more wheat has been exported by sea. Analysts estimate that about 45% of the grain available for export has already been shipped. It is noteworthy that Russia exported 28% more grain via the Baltic Sea in October compared to the previous year. Via the Caspian Sea, more than 50% less grain was exported, according to ship data. The Caspian Sea is the main route to Iran.
Competitive Disadvantage
American exporters are struggling with a strong dollar, various analysts say. Inflation in the US has risen from 2.4% last month to 2.6%. This is in line with expectations. The consequence of the increased inflation is that the Federal Reserve's room to lower interest rates becomes smaller. Lowering interest rates is an important tool of the Fed to bring down the value of the dollar. American grain was already relatively expensive on the world market, and this is exacerbated by a strong dollar.
A source at Cofco (a Chinese state-owned food processing company) reports that China may import much less soybeans from the US this season than the USDA expects. The USDA assumes that the US will export 109 million tons of soybeans to China in the 2024/25 season. According to the executive at Cofco, this could drop to 98.8 million tons. China stockpiled soybeans in the run-up to the US elections and therefore does not need to buy. The actual amount of soybeans China will import in the second part of the season depends, according to the source, on how the trade relationship with the US develops when Trump is in the White House.
