Black Sea and China give grain prices fresh boost

Wheat is receiving renewed support at the start of this week from the ongoing disruption to grain exports via the Black Sea. Adding to the positive sentiment is optimism about trade between the United States and China, which is also supporting corn and soybeans. For the wheat market, however, developments surrounding Russia and Ukraine remain the main price driver for now.The December wheat contract on Euronext (Matif) closed €2.25 higher on Monday at €243.75 per tonne. Wheat in Chicago made a similar move, with the December contract gaining 12.5 cents to $7.26¾ per bushel. This allowed the market to recover from the decline at the end of last week.The immediate trigger once again came from the Black Sea region. Heavy drone attacks by Russia and Ukraine have further reduced hopes of a swift de-escalation. Exports via the Black Sea remain severely disrupted. Last season, almost 90% of Russian seaborne grain exports went through Black Sea ports. Russian companies are therefore trying to free up capacity at ports on the Baltic Sea and in the Arctic. Among other things, terminals that normally handle fertiliser or coal are being adapted to handle grain. For now, however, this offers only limited relief.SovEcon did raise its forecast for Russian wheat exports in September from 1.8 million to 2.1 million tonnes, but a year ago 4.6 million tonnes were exported in the same month. Total Russian exports of wheat, barley and corn are estimated at 2.45 million tonnes this month.Buyers look for alternativesThe problems are also beginning to have a visible impact on trade flows. Egypt, one of the world's largest wheat importers, is trying to reduce its dependence on Russia and Ukraine. The country is buying wheat from France, among others, while also strengthening trade ties with Bulgaria and Romania. A French shipment of 50,000 tonnes is on its way to Egypt.Buyers elsewhere are also looking for alternatives. A Vietnamese importer had to replace two planned shipments from the Black Sea region with US wheat and two others with Bulgarian wheat. Higher freight and insurance costs make these alternatives more expensive. Bangladesh, Turkey and the United Arab Emirates are also looking more closely at other origins.This is providing additional support to European wheat. Pakistan also bought 365,000 tonnes of wheat last weekend and almost immediately issued a new tender for another 185,000 tonnes. Demand therefore remains firm despite higher prices.China gives Chicago an extra pushBesides the Black Sea, the market is keeping a close eye on Washington this week. US President Donald Trump and Chinese President Xi Jinping are scheduled to meet on Thursday. Traders hope the talks will result in agreements on additional purchases of US agricultural products.Soybeans in particular reacted strongly to this on Monday. The most-traded contract gained 24.5 cents to $13.28 per bushel, taking it close to a multi-year high. China has already bought US soybeans through state-owned companies. The market is hoping that private companies will also become more active again if trade barriers are eased further.For wheat, the potential impact is harder to gauge. Chinese wheat imports have fallen in recent years to around 4 million tonnes a year, having previously exceeded 10 million tonnes. Nevertheless, a new trade agreement could also include additional purchases of wheat, corn or sorghum. Corn jumpsCorn also benefited from the positive sentiment on Monday. The December contract in Chicago gained 15.5 cents to $5.43 per bushel. In Paris, the November contract rose €4.75 to close at €268.75 per tonne.The European market is taking its cue from Chicago. With supplies from Ukraine limited, the United States has become a more important supplier to the EU. As a result, price movements in Chicago are feeding through more quickly to the European corn market.Meanwhile, the US corn harvest is progressing as normal. By 20 September, 13% of the acreage had been harvested, 2 percentage points above the five-year average. Exports are also running strongly. In the week to 17 September, 1.94 million tonnes of corn were inspected for export, 40% more than in the same week last year. Since the start of the new marketing year, US shipments are 16% ahead of last year.