Easing war premium in wheat prices may be premature

The American president Donald Trump once again caused the necessary unrest on the commodity markets. Ahead of his speech last night European time, the market cautiously assumed that Trump would announce a quick end to the war in Iran. His message to the American people turned out to be somewhat different. Since the war in Iran, the wheat market has been somewhat on the rise. The higher price does not appear to have a negative impact on Russian grain exports. The May contract for wheat on the Matif closed yesterday €3.50 lower at €201.25 per tonne. On the CBoT the loss in wheat was somewhat larger than in Paris. On the Chicago exchange, wheat closed 18¾ cents lower at 3% lower to $5.97½ per bushel. That means wheat has fallen below the psychological $6 level. Corn also closed in the red, but here the loss was limited to 3½ cents to $4.54¼ per bushel. Soybeans lost 2½ cents, bringing them to $11.68½ per bushel. The fact that wheat in particular took a big step back is, according to some analysts, due to Trump's television address. The broadcast was yesterday evening American time after the markets had closed. The market cautiously assumed that the American president might announce a quick end to the war in Iran. As we have come to expect from Trump, his message was just a little different from what various analysts expected. According to the American president, almost all objectives of the war have been achieved and the war is almost over. Yet the US will hit them very hard over the next two to three weeks, Trump said. We are going to send them back to the stone age, where they belong. Those are not exactly statements that point to a quick end to the unrest in the Middle East. The unrest on the commodity markets is not eased by Trump's speech. Crude Brent oil is up 7% this morning at the time of writing. What grains will do is hard to predict but reasonably they will move up with it. Russian exports picking up It sounds contradictory, but rising grain prices are not hurting Russian grain exports. Analysts at the Russian railway company Rusagrotrans expect Russian wheat exports for the month of March could even move toward the monthly record of 4.89 million tonnes for March 2024. Rusagrotrans is counting on exports of 4.85 million tonnes for last month, compared with 4.65 million tonnes last week. By comparison, the five-year average for March stands at 2.9 million tonnes. In total, 37.7 million tonnes of wheat have been exported by Russia in the current season. In the same period last season the total stood at 36.3 million tonnes. Egypt is the largest buyer of wheat from Russia with 7.6 million tons, followed by Turkey with 5.8 million tonnes. Iran is in third place with 1.9 million tonnes. For the coming harvest, prospects in Russia are reasonably favorable when it comes to the weather. In the Central Federal District (the European part of Russia bordering Belarus and Ukraine), the snow has almost disappeared according to Rusagrotrans. In the Volga region that will last until mid-April. In the southern districts of Russia, the winter grains are steadily growing and the first spring grains are emerging. Small acreage and drought in the US A broad supply of wheat on the world market remains, partly due to the relatively good growing conditions in the Black Sea region and Europe, the main factor shaping market sentiment. Some bullish news came from the US, but it is only having limited impact on the market. The total wheat acreage in the US, at 43.775 million acres, is the smallest in one hundred years, according to the acreage outlook released by the USDA earlier this week. Combine that with the drought affecting key wheat states such as Kansas and Oklahoma and the chance of a large wheat harvest in the US does not seem very great.