THAT grain prices continue the recovery that began three weeks ago in a market now dominated by the weather, the “weather market,” and especially by the drought in the United States, the world’s largest corn producer.
Operators took a “bang” on Tuesday evening with the release of the weekly report from the US Department of Agriculture (USDA), which reveals a further deterioration in yellow grain growing conditions, “the worst since 1992”, states Damien Vercambre, of the Inter-Courtage firm.
This water deficit causing tension on the Chicago Stock Exchange, but also worrying the European market with “nervous” wheat in recent days, emphasizes Gautier Le Molgat, from the company Agritel (Argus Media France). Still rising on Wednesday, its price stood at 246 euros per ton at 14:00 GMT.
” THAT “weather market“generates movements which are reinforced by the financial sphere”, whereas in reality it is necessary to wait until July during pollination to be able to better assess the yield of crops, explains Mr Vercambre.
These types of episodes that drive prices up often occur in June, when crops are growing, and “are generally short-lived” before the market focuses more on demand, says Dewey Strickler, of Ag Watch Market Advisor.
On the other hand, rain fell last weekend in the southeastern United States, and more rain is also expected to bring water to Corn Belt soybeans and corn in the coming days, he indicates.
At the same time, European wheat, whose price has risen, faces extremely competitive prices offered by the Russians, who are looking for consumers to relieve their colossal stocks. According to AgritelAlgeria would have bought in recent days almost ” 630,000 tonnes of wheat mainly of Russian originwith unbeatable prices.
The Ukrainian corridor “in the background”
“With such a strong price difference, the Russians risk gaining a lot of market share,” analyzes Mr. Le Molgat, to the detriment of European and American wheat exporters. According to him, the uncertainty over the expansion hangs onUkrainian Grain Export Agreementwhich expires on July 18, has “gone to the background” behind weather-related fear.
During the visit of an African mediation delegation to Russia late last week, Moscow once again accused the West of blocking Russian grain and fertilizer exports with its sanctions.
“Many operators have given up” on the continuation of this agreement, which has made it possible to bring more than 31 million tons of grain out of Ukraine by the Black Sea, estimates Damien Vercambre. This has supported wheat prices without causing them to rise.
The campaign is coming to an end before the start of the new harvest and “there is some corn left (in the silos), but it is a little less important than when the agreement was originally instituted”, he said.
In addition to European ports on the Danube or in the Baltic Sea, “Ukraine can still use rail. It’s more difficult and expensive (…), but it can be done,” said Dewey Strickler. On the other hand, the Ukrainian harvest promises to be reduced by at least 30%, according to Mr Vercambre, due to mining areas or areas under Russian control, which will limit the amount of grain to be stored.
China, the main recipient of grain sent through the corridor in front of Spain and Turkey, is currently continuing to load corn and should soon have reached the 5.5 million tons imported thanks to this agreement.
