Analysis Grains
Kremlin optimistic about upcoming grain harvest
The supply of grain from the Black Sea region is becoming tighter. Yesterday, it was the Russian Minister of Agriculture who contributed to the discussion. However, she mentioned very different numbers compared to the chairman of the Russian Grain Union earlier this week. The corn and soybean market is influenced by the weather forecasts for South America. The proposed import tariffs by the new US Secretary of the Treasury seem to be ignored by the market.
The March wheat contract on the Matif closed €3.50 higher at €232.50 per ton yesterday. Wheat in Chicago showed stronger gains than in Paris. Wheat on the CBoT closed 3.2% higher at $5.62½ per bushel. Corn also rose by 2.4% to $4.97 per bushel. Soybeans, like grains, closed in the green and rose by 1.5% to $10.60½ per bushel.
The Russian Minister of Agriculture, Oksana Lut, expects that Russia will be able to export 20% less grain in the 2024/25 season compared to the previous season. The minister estimates the export potential for this season at 57 million tons, down from 72 million tons last season, as she mentioned at an agricultural conference in Moscow. According to Lut, 37 million tons of grain have been exported in the first half of the season. To ensure sufficient grain for the domestic market in the second half of the season, export quotas have been reduced by almost 70%.
For the 2025 harvest, the grain area will be expanded by 1 million hectares to 84 million hectares. The Kremlin has set up a support program of 42 billion rubles (approximately €410 million) in the form of short-term loans to farmers. Lut states that 82% of winter grains in Russia are in good condition.
Market is less optimistic
This paints a very different picture than Arkady Zlohevsky, the chairman of the Russian Grain Union. Zlochevsky had previously mentioned a grain export of 47 to 48 million tons and stated that 37% of winter grains are in fair or poor condition.
LSEG keeps the yield forecast for the upcoming wheat harvest in Russia unchanged at 80.3 million tons, but warns of weather risks. There is little snow in the Caucasus provinces. This has not been a problem in the past two weeks due to relatively mild weather, and the next two weeks also seem unaffected with mild temperatures expected. "Potential cold periods later in February could cause significant damage to winter grains, especially in regions not fully covered with snow," writes LSEG.
Ukraine has exported 25.35 million tons of grain this season, compared to 23.15 million tons in the same period last year. The final wheat stock for Ukraine is estimated to be approximately 25% lower than the previous season. Analysts see this as another indication that the supply of grain from the Black Sea region is tightening.
Weather forecasts for South America
Corn and soybean prices are mainly influenced by the weather forecasts for South America. Further reductions in harvest forecasts for Argentina are not ruled out due to drought stress in crops. In Brazil, farmers are concerned about rain at the beginning of the harvest.
Interestingly, the broad import tariff increase of 2.5% proposed by Scott Bessent (the US Secretary of the Treasury) and set to be implemented by Trump starting this Saturday, barely affects the grain market. Apparently, traders assume that a compromise will be reached before the deadline to avoid a trade war.
