Analysis Grains
China and Brazil send a signal to Trump
In the war between Russia and Ukraine, a new step has been taken on the escalation ladder. Ukraine yesterday deployed British long-range missiles and Russia responded today with the use of an intercontinental missile. The availability of wheat is a point of concern. Harvest is underway in the southern hemisphere, and supply from that side could dampen a potential rally. Meanwhile, Brazil and China are strengthening ties and announced a new trade agreement yesterday.
The December contract for wheat on the Matif closed €1.75 higher at €219.75 per ton yesterday. On the CBoT, grains also closed in the green. Wheat closed 0.5% higher at $5.52½ per bushel. Corn increased by 0.7% to $4.30¼ per bushel. Soybeans took a step back and closed 0.8% lower at $9.90½ per bushel.
Following the American-made Atacms missiles, Ukraine yesterday used the British Storm Shadow long-range missiles against Russia. The Kremlin today fired an intercontinental missile at Ukraine for the first time, as reported by the Ukrainian Air Force. Concerns about the impact of the war on the grain market are increasing. However, the effects on the transport of grain from the Black Sea region remain limited for now. This could explain why the war premium on wheat is not being significantly increased, according to various analysts.
According to sources, Algeria has purchased 160,000 to 180,000 tons of durum wheat. The price is reported to be between $348 and $360 per ton C&F. The durum wheat comes from afar, with Australia, Canada, and the US mentioned as countries of origin.
Southern Supply
Tight wheat stocks provide a fairly solid floor in the wheat market. The fact that the wheat price is hovering around its lowest level in four years is not very motivating for farmers to quickly get rid of the wheat in the silos. However, this does not automatically mean that the wheat price will rise. The wheat harvest has begun in the southern hemisphere. For the major wheat-exporting countries below the equator - Argentina, Australia, and Brazil - the USDA predicts a wheat harvest that is 18% larger than last season. The supply of wheat during the harvest could smother any potential price rallies on the world market.
Relationship Management
Brazil and China are strengthening ties even before Trump takes office. It was announced yesterday that Brazil has a new trade agreement with China for, among other things, fresh grapes, fishmeal, sesame seeds, sorghum, and other products. Grains or soybeans are not mentioned, but those who understand the situation can infer the direction in which Chinese trade policy is heading.
In October, China imported 541,400 tons of soybeans from the US, according to Chinese customs data. This is double the amount in October 2023. Compared to the 5.5 million tons from Brazil and 1.4 million tons from Argentina, the US was a small player in the Chinese market in October. In the first ten months of 2024, China imported 15.1 million tons of soybeans from the US, which is 13% less than the same period a year earlier. Brazil exported 67.8 million tons to China, an increase of 14%.
