Wheat price falls on hopes of Black Sea trade recovery

The grain trade is focusing more on the supply that could become available at the start of this week than on grain supplies threatened by logistical or weather-related problems. For wheat, the market is hoping for a recovery in Black Sea exports, while ample US supplies are providing a counterweight to problems affecting maize production in Europe and Ukraine. In the soy market, disappointment over Chinese demand dominates sentiment. The problems with grain exports from the Black Sea region are still significant. Yet the risk premium is leaking out of the grain market. Traders are mainly looking ahead to a recovery of export flows. As a result, wheat is giving up some of its price gains. On the Matif futures market in Paris, the December contract fell on Monday for the fourth trading day in a row. During the session, it touched €231.75 per tonne, the lowest level since mid August. Later in the day the price recovered slightly to €233.25 per tonne. Wheat also fell sharply in Chicago. The December contract closed 14.5 cents lower at $6.88¾ per bushel. That has undone a substantial part of the price increase from early September. This while the problems with grain exports from the Black Sea region have hardly been resolved in the meantime. The difference lies mainly in traders' expectations. The market is taking into account a diplomatic solution and with that a recovery of export capacity. Market looks beyond Black Sea problems This could have major consequences, especially for Russia. A considerable part of Russian export capacity around the Black Sea is idle. According to market experts, however, up to 80% of capacity could become available again relatively quickly if the attacks on the ports stop. In the meantime, Russia has shifted part of its grain exports to ports on the Baltic Sea. IKAR estimates Russian wheat exports in September at about 2.3 million tonnes. The export price for Russian wheat with 12.5% protein from export ports west of Saint Petersburg is around $267 per tonne FOB. That price also fell slightly last week. The fact that Russia is still exporting grain despite the problems takes some tension out of the market. In addition, importers are being cautious and looking for alternatives. Ukraine is also still managing to export grain. In the week from 17 to 23 September, exports of wheat, maize and barley rose by 40% compared with a week earlier to more than 372,000 tonnes. More was exported especially over land. Wheat exports increased by a third to nearly 274,000 tonnes. Exports via the Danube declined instead. China disappoints grain trade A second disappointment for the grain market comes from China. The new trade agreement between the United States and China provides for lower Chinese tariffs on, among other things, American wheat and maize. However, this has not yet led to concrete large purchases. Disappointment was especially strong for soy. Soybeans were kept outside part of the tariff cuts and according to market information remain subject to an additional Chinese levy of 10%. That news led to a strong sell-off on the futures market. Investment funds had built up a large net long position in soy and even a record position in soybean meal. When the trade agreement turned out less favorable than hoped, part of that was quickly reduced. The most traded soy contract fell to $12.88¼ per bushel and intraday reached the lowest level since the end of August. Maize market ignores Ukraine risk Selling pressure also dominates in maize. The November contract on Euronext closed Monday €3 lower at €268 per tonne. In Chicago, the December contract lost 5.25 cents and ended at $5.23 per bushel. That is remarkable given the problems in Ukraine. The Ukrainian Ministry of Agriculture warns that disruptions around the Black Sea threaten exports of more than 30 million tonnes of agricultural products this season. Maize is important in Ukrainian exports. According to the ministry, export problems could cause Ukrainian producers to miss out on more than $10 billion in revenue. If problems persist for a long time, that could affect acreage and production in the 2027/28 season. For now, however, the maize market is mainly looking at the ample supply from the United States. The American harvest is progressing mostly under favorable conditions, although rain in parts of the Corn Belt is causing delays. For the quarterly USDA report, analysts according to a Reuters poll expect on average 1.918 billion bushels of maize stocks as of 1 September. That is far more than the 1.551 billion bushels a year earlier. China could also provide additional demand in the longer term. Import tariffs on American maize have been reduced. For now, however, no concrete purchase volumes are known that would provide direct support to the market. European maize harvest disappoints Opposite the ample American supply is a clearly tighter situation in Europe. The European research institute JRC has further lowered the average yield forecast for grain maize in the EU to 6.50 tonnes per hectare in this month's MARS report. That is 8% below the five year average and 9% below last year. Compared with the previous estimate, another 2% was shaved off. Drought and heat have hit especially hard in parts of Central and Western Europe. In Hungary, the expected yield is 42% below the five year average. In Slovakia, the shortfall is 30%. Austria and the Czech Republic are also well below that. Poland is holding up relatively well, while expectations for Romania are actually above the five year average. The maize market is therefore increasingly showing two sides. On the one hand there are ample American stocks and expectations that trade between China and the United States can pick up. On the other hand European yields are disappointing and a large part of Ukrainian exports remains vulnerable because of the problems around the Black Sea. European soy also takes a hit Yield expectations for soy in Europe have also worsened. JRC estimates the average EU yield in the MARS report at 2.26 tonnes per hectare. That is 15% below the five year average and 19% below last year. Especially France, Austria, Germany and Hungary are clearly lagging behind. On the international market, however, that does not outweigh developments around China and the progress of the American harvest. In the US, about 17% of soy had been harvested at the start of this week. About 18% of maize was in. The harvest is therefore roughly in line with the five year average.