Analysis Grains
Russia stirs up the wheat market
The Kremlin has given a clear hint about tightening Russian wheat export quotas if yields in Russia disappoint. The abundant supply of relatively cheap Russian wheat is putting pressure on the world market. Import duties and the uncertainty surrounding them continue to occupy minds in world trade. Trump's import duties, however, are not a problem for everyone. Brazilian soybean growers actually benefit from them.
The March wheat contract on the Matif closed €6 lower at €205 per ton last Friday. The May contract, on which most trading is done, closed at €221.75 per ton. On the CBoT, wheat closed 0.6% lower at $5.33¾ per bushel. Corn closed higher with a 1.2% increase to $4.55¼ per bushel. Soybeans closed 0.4% lower at $10.10¼ per bushel.
Russia brought bullish news for the wheat market. The Russian news agency Tass reports that the Kremlin is considering measures to restrict wheat exports if the upcoming wheat harvest falls short of expectations. "The government will quickly initiate the introduction of additional non-tariff measures if poor weather leads to lower yields," Tass quotes a statement from the Russian Ministry of Agriculture.
It is not uncommon for Russia to work with export quotas that are tightened or expanded towards the end of the season. Earlier in the season, it was an abundant supply of Russian wheat that weighed on prices in the world market. This led to good exports in the first half of the season. As things stand now, the global wheat supply could be the smallest in nine years at the end of the export season in July.
Call to Trump
International trade relations continue to play a major role in the grain market. It can change almost by the hour, but as it stands now, there will be no US tariffs on products from Mexico and Canada covered by the USMCA (the successor to NAFTA). The much-discussed 25% tariff will only take effect on April 2 - Trump believes that implementing it on April 1 could give the wrong impression. Farmers in North America will get a breather. The agricultural sectors in Canada, the US, and Mexico are somewhat interdependent. The US imports about 85% of its potash from Canada. The country, in turn, is a major buyer of American biofuel. Mexico is a large buyer of American corn and exports vegetables and fruits to the US. The uncertainty caused by the on-again, off-again trade barriers does not bode well for farmers' confidence, not to mention their wallets. Some senators, including those from Illinois, are aware of this. "At a time when farmers operate on razor-thin margins due to low commodity prices and higher input costs, the chaos and uncertainty of these tariffs threaten their livelihoods. In addition to making it more difficult for farmers to sell their products, these tariffs make it harder for Americans to put food on the table," write a group of senators in a letter to Trump. "Farm families should not become unintended casualties in an unnecessary trade war."
Forgotten Battle
Somewhat overshadowed by the attention Trump receives are the trade tensions between China and Canada. Last year, Canada imposed a 100% duty on electric cars and a 25% duty on steel and aluminum from China. In response, China imposed anti-dumping measures on Canadian canola and lodged a complaint with the World Trade Organization (WTO) about Canadian trade restrictions. Now, Beijing threatens import duties on canola oil, pork, and seafood should Canada be tempted to escalate the trade war.
While import duties loom in the US, Brazil aims to abolish import duties on various basic foodstuffs. Brazilian President Lula da Silva is forced to do so to control high inflation. This high inflation is certainly not helping Lula's popularity. Import duties are being abolished for items such as beef, corn, sunflower oil, and sugar.
When Two Dogs Fight...
Brazilian soybean growers may want to thank Trump. Due to the tariffs hanging over US soybeans, buyers are willing to pay a hefty premium for Brazilian soybeans. The agricultural economics institute Cepea has calculated that the premium on Brazilian soybeans increased from 50 cents in February to 85 cents in March. This is the highest monthly premium since 2022. For the week ending March 6, Cepea calculated a Brazilian soybean price of 135.72 reais per 60-kilo bag. This is approximately $10.63 per bushel.
A significant portion of soybeans in Brazil has already been harvested, namely 36.4% compared to 38% at the same time last year. Cepea is cautious about the yield expectations for soybeans that are still standing. Due to the recent dry weather in Brazil, the harvest could turn out lower, according to the institute.
