Export problems drive wheat prices higher

The wheat market got a strong tailwind yesterday. New tensions around the Black Sea, damage to Russian export terminals and logistical bottlenecks on the Danube put traders on edge. At the same time, European exports continue to lag and a larger Australian harvest later in the season could provide a counterbalance. The September wheat contract on Matif closed yesterday €8.50 higher at €236 per tonne. Wheat also rose sharply on the CBoT, up 45 cents to $7.30½ per bushel. Corn closed 13½ cents higher at $5.14 per bushel. Soybeans followed the same movement as grains and posted a gain of 26¼ cents to $12.54¼ per bushel. The unrest in the Black Sea region is one of the main drivers behind the rally, especially in the wheat market. Russia wants to intensify the missile attacks on Ukraine, according to various media based on sources within the Kremlin. Among other things, the center of Kyiv and important infrastructure would be targets of Moscow. Ukrainian attempts to reach a ceasefire or other truce with Russia can for now be thrown in the trash, various analysts say. The grain terminals in the Russian ports of Novorossiysk will remain out of service for at least one to four months. According to some sources, that is how long it will take to repair the damage caused by Ukrainian attacks. The Kremlin is said to be considering temporarily abolishing the export tax on wheat. According to experts, that is unlikely to make much difference. By rail and via the Russian ports on the Baltic Sea and the Caspian Sea, exports can be increased somewhat, but this cannot fully replace the capacity of the terminals on the Black Sea and the Sea of Azov. No ships after drone attack Shipping company MSC one of the major players in sea container transport has canceled all new bookings for cargoes to and from Novorossiysk. MSC reportedly came to that decision after one of their ships was hit by a drone, Bloomberg reports. The Caspian Sea is by the way an interesting route. This saltwater lake between among others Russia and Iran could still be an alternative for access to the world market for Russian grain exporters. As we know, access to Iranian seaports on the Persian Gulf is also far from certain due to the blockade of the Strait of Hormuz. Ukraine does not escape unscathed For Ukraine, export via the Danube is an important alternative for grain exports. Due to the low water level in the river, exports via that route are also not going smoothly. Up to seventy ships are waiting for the Sulina Canal to get from the Danube to the Ukrainian terminals to load grain and other goods. With around five to seven ships passing through the canal daily, that queue is not easily solved. Egypt, which typically sources 80% of the wheat it imports from Russia and Ukraine, reportedly bought two wheat cargoes in France. Even so, European wheat exports are lagging significantly behind last season. According to European Commission data, the EU exported 2.38 million tonnes of wheat this season up to and including 23 August. That is 33% less than in the same period last season. Optimism in Australia In Australia, this season's wheat harvest could turn out higher than previously forecast. That is what four Reuters analysts say, at least. Abares, which falls under the Australian Ministry of Agriculture, estimated in June a harvest of 26.7 million tonnes of wheat. Due to the limited availability of fertilizer because of disruptions in the Middle East and the forecast of a dry season, the agency was cautious in its yield estimate. Because more rain has fallen than previously expected, the Reuters analysts say the harvest is more likely to come in between 30 and 32 million tonnes. That is less than last season but above the ten-year average.