Threat from the Kremlin not yet affecting the grain market

Reports from Canada were quite bullish for the grain market. However, there was little attention to this in the trading. The situation surrounding Russia with a large military exercise and this morning even a violation of Polish airspace does not make the grain market any more secure. In the US, farmers are more focused on the weather reports than on geopolitical developments. Dry weather there is favorable for harvesting early corn, but the later crops could use some moisture. The September wheat contract on the Matif closed €3 lower at €170.25 per ton. The December contract, where most trading occurs, also took a step back, closing €2.25 lower at €188.75 per ton. At the CBoT, wheat was the biggest decliner, down 4¾ cents to a close of $5.00¾ per bushel. Corn closed 1¾ cents lower at $4.01¼ per bushel. Soybeans also lost some ground, closing 2 cents lower at $10.11½ per bushel. The wheat inventory in Canada is significantly smaller than last year and than the market expected. This is evident from the figures published by Statistics Canada yesterday. According to the agency, the inventory as of July 31 was 4.1 million tons. That is 22% less than last year at this date. Analysts and traders were expecting a stock of 4.4 million tons. The largest decline, according to Stats Can, was in the on-farm inventory. Of the total inventory, 1.7 million tons were in silos at the farm, which is 34% less than last season. Canola is in demand The canola inventory declined even more sharply than the wheat inventory. With 1.6 million tons as of July 31, the inventory is 51% smaller than last year. Here, too, the largest decline is in what is stored at the farmers. That is 378,000 tons, which is 70% smaller than last year at the reference date. Meanwhile, the demand for canola is high according to Stats Can. Processing in Canada rose to a record high of 11.4 million tons. Exports of canola increased by nearly 40% to 9.3 million tons due to strong foreign demand. In contrast to the relatively small wheat and canola inventories, there are larger inventories of dry peas and lentils. The pea inventory is actually 64% larger compared to last year. The lentil inventory is even 233% larger. In absolute numbers, we are talking about 489,000 tons of peas and 549,000 tons of lentils. The figures from Canada were quite bullish for the grain market, but the trading did not pay much attention to them, so conclude various analysts. Market players seem to be busier taking positions in the lead-up to the Wasde report from the USDA, which will be released on Friday evening Dutch time. Dry weather a curse and a blessing The weather reports for the US are not really making the grain market nervous either. For the southern wheat belt, an average to drier weather type is expected. This is favorable for getting the wheat smoothly into the ground. More attention is drawn to the weather in the corn belt. Here, too, the American meteorological institute predicts below-average precipitation. On one hand, this is favorable. For the harvest of early corn, farmers certainly prefer it to remain dry. The later corn and soybeans could still use some moisture according to some local sources. These crops risk maturing too quickly and not achieving their full yield potential. The EU continues to struggle to find buyers from outside the bloc for wheat. Up until September 7, the EU exported 3.2 million tons of wheat. That is 37% less than the 5.1 million tons exported during the same period last year. More barley has been exported, namely 1.72 million tons this season compared to 1.39 million tons last season. Imports of corn and canola are lower than last season. Up until September 7, 2.09 million tons of corn have been imported compared to 1.72 during the same period last year. In canola, the difference is larger, with this season so far importing 491,000 tons compared to 1.03 million tons last season. The lower imports are, according to some experts, related to curbing the free access of products from Ukraine to the European common market. Military exercise In wheat exports, European players are facing stiff competition from the Black Sea region. The rising tensions with Russia could lead to surprises there. The escalated conflict in Ukraine is well known. This morning, Russian drones violated Polish airspace. Starting this Friday, a large five-day Russian military exercise in Belarus is set to begin, with the rather uninspiring name Zapad, meaning west in Russian. Some experts suspect that these Russian actions together could provoke new western sanctions. Should Russian grain exports somehow fall under that, it would be an immediate bullish signal for the markets.