Poland benefits from problems in the Black Sea

The grain market remains strongly influenced by developments around the Black Sea. Wheat gave back some of its earlier gains on Tuesday after hopes of diplomatic de-escalation put pressure on the risk premium. Corn, on the other hand, moved higher because of deteriorating crop conditions in the United States. On the Matif futures market in Paris, the December wheat contract closed 0.9% lower on Tuesday at €236.75 per tonne. The market thus moved somewhat away from the €242 per tonne that was reached earlier. In Chicago, wheat held up better. The December contract closed 3¾ cents higher at $7.03¼ per bushel. A day earlier, the contract touched $7.15, the highest level since May 2024. The sharp moves of the past few days are all related to export problems around the Black Sea. Attacks by Russia and Ukraine on ports and ships have disrupted grain trade. According to consultancy SovEcon, most shipments via Russian ports on the Black Sea and the Sea of Azov are at a standstill. These ports previously accounted for about 70% of Russian grain exports. On the other hand, the market drew some hope on Tuesday from signals about possible de-escalation. Ukrainian President Volodymyr Zelensky spoke about a diplomatic path regarding the attacks on the Black Sea. A visit by an American military aircraft to Moscow also fueled speculation about diplomatic efforts. At the same time, however, Russia reported new attacks on ships in Ukrainian ports. Russian wheat remains availableThe reason wheat prices are not rising further is also that Russia has a plentiful harvest. Domestic Russian wheat prices are under pressure from the large supply and the problems of getting the grain to foreign buyers. Russia is therefore considering measures to keep exports moving. According to Russian media, temporarily abolishing the export tax on grain is being considered. Alternative export routes via ports on the Baltic Sea and the Caspian Sea are also being examined. President Vladimir Putin estimates that Russia has about 60 million tonnes of grain available for export this season. SovEcon expects Russian exports to rise from 1.95 million tonnes in July to 2.2 million tonnes in August. The fact that Russian grain is widely available is putting a brake on the international wheat price. Russian wheat is also being offered at a steep discount compared with American wheat. A recovery of normal shipping from the Black Sea could therefore put downward pressure on prices in the European market. Demand partly shifts to Europe As long as the problems continue, the European market does benefit from extra demand. Traders report that buyers who normally purchase in Russia and Ukraine are looking for alternatives. Poland is drawing particular interest. An estimated 100,000 to 150,000 tonnes of Polish wheat have been sold in two weeks, mainly for delivery to North Africa in September and October. Romania and Bulgaria are also seeing more demand. For Western European wheat, however, the competitive position remains difficult. Importers find prices there relatively high. In addition, India has decided to lift restrictions on wheat exports. That could bring an extra supplier onto the market if the problems in the Black Sea region persist for longer. Corn rises in ChicagoWhere wheat is driven mainly by geopolitics, corn is increasingly about the American harvest. The most traded corn contract on the CBoT closed 8 cents higher on Tuesday at $5.23½ per bushel. That gave the contract a record for its delivery period. The reason is a deterioration in American crops that was stronger than expected. The USDA still rated 57% of corn as good to excellent on Sunday. A week earlier that was 60%, and analysts had on average expected 59%. It is the lowest condition score for this time of year since 2023. That is increasing doubt about American yield expectations. The recent tour through the Midwest has further heightened those concerns. The corn market is therefore beginning to build in more risk premium for a smaller harvest than previously assumed. Chinese demand supports soybeans Soybeans also closed higher. The CBoT contract ended Tuesday 13½ cents higher at $12.37¾ per bushel. In particular, continued Chinese demand for American soybeans is providing support. That is offset by geopolitical uncertainty. New American sanctions against trading partners of Iran could ultimately also affect Chinese companies. That increases the risk of countermeasures from China, by far the most important buyer of American soybeans.