Tighter grain stocks drive prices higher in Chicago

The grain market remains in the grip of geopolitical tensions. The Kremlin is hinting at an end to the war in Ukraine, but the attacks between Ukraine and Russia continue unabated. The market is also already anticipating the estimates in the new Wasde report, which will be released tonight Dutch time. Prices are rising especially in Chicago, because traders expect stocks to decline. The December wheat contract on the Matif closed yesterday €0.50 higher at €245.25 per tonne. On the CBoT, wheat closed 12½ cents higher at $7.41¼ per bushel. Corn rose 6 cents to $5.33¾ per bushel. Soybeans followed the same trend as the grains and closed 22¾ cents higher at $13.32¼ per bushel. The unrest in the Black Sea region has more impact on the US market than on the European one. This week, the Kremlin hinted at diplomatic paths to bring an end to the war in Ukraine. In practice, however, that is proving difficult. Both Russia and Ukraine continue to attack each other with missiles and drones. Logistics hubs and ports, among other things, have been targeted. That continues to create a firm undertone in the market. Market bureau SovEcon lowered its export forecast for wheat from Russia by 3.2 million tonnes to 41.4 million tonnes. By comparison, the USDA estimated Russian exports at 46 million tonnes in the August Wasde report. For September, SovEcon expects Russia to export 2 million tonnes of wheat. Smaller harvest in Europe In Europe, the wheat harvest is turning out lower than expected, according to Expana. The market bureau lowered its yield forecast by 700,000 tonnes to 126.1 million tonnes. The USDA estimated a European wheat harvest of 134.2 million tonnes in its latest Wasde report. Tonight Dutch time, the USDA will release the September edition of the Wasde report. Some analysts say that especially for wheat and soybeans the USDA has little room to lower yield forecasts without having a relatively large impact on ending stocks and thus probably also the market. Looking at price movements on the Chicago exchange, market participants are already anticipating a tightening market. China tries to win over Trump China is meanwhile active in the US soy market. Sources told Reuters that China bought 1 million tonnes of soybeans in the US this week. The timing was chosen tactically. Later this month, a visit by Chinese President Xi to Washington is scheduled. Chinese imports of soybeans from the US are, according to some experts, a diplomatic tool to win over Trump. Some, however, believe that China also has a direct self-interest. Soybean stocks in Brazil are declining and importing from another country strengthens China’s position. The wheat harvest in the US is not yet complete (14% of the spring wheat still needs to be threshed according to this week’s Crop Progress report) and attention is already turning to the start of the new season. Much of the US is dry. The important winter wheat states Kansas and Oklahoma are almost entirely shaded on the new drought monitor that was published yesterday. Parts of the corn belt are faring relatively well in terms of drought.