Analysis Grains

Russia blocks again two grain ships

May 1, 2024 - Jurphaas Lugtenburg

The spread between contracts for old and new harvest on the futures markets remains large. Buyers on the physical market are trying to take advantage of this situation. In England, the reports about the upcoming harvest are not very encouraging. The milling industry association even mentions a 40% decrease in wheat production. Russia has seized two ships loaded with grain bound for Egypt, and in Argentina, exports were disrupted due to strikes.

The May contract for wheat on the Matif closed €3.25 lower at €205 per ton yesterday. Wheat on the CBoT closed 0.9% lower at $5.85 per bushel. Corn closed a quarter cent higher at $4.39½ per bushel. The biggest decliner on the Chicago exchange in the last trading session was soybeans, which dropped 1.3% to $11.45½ per bushel.

The gap between old and new harvest of wheat is relatively large both in Paris and Chicago. On the Matif, the September contract closed €22 higher than the May contract, at €230 per ton. In Chicago, the difference is less significant, with the September contract at $6.03¼ per bushel. According to some sources, the interest among buyers to fulfill the contract and physically deliver the wheat is relatively high due to this gap.

According to various sources, two ships loaded with wheat destined for Egypt are currently detained. The total amount is approximately 120,000 tons of wheat, the purchase and quality of which have been approved by the Egyptian state buyer Gasc. The exact reason for the ships not being allowed to depart is unknown. Some analysts see this as confirmation of a report by Bloomberg stating that the Kremlin is hindering exporters who do not comply with Moscow's wishes. Russia is said to be working with minimum prices that exporters must not undercut, for example in tenders like those issued by Gasc.

In the United Kingdom, the crop harvest in 2024 could be 17% lower than in 2023. This warning comes from the Energy & Climate Intelligence Unit (ECIU). The production of wheat, barley, oats, and rapeseed could be 4 million tons lower. ECIU's forecast is based on data from AHDB and the UK's Ministry of Agriculture. The milling industry association in the UK expects the milling and baking wheat harvest to be 40% lower than the previous season. According to ECIU, food producers may become more dependent on overseas imports at potentially higher costs.

Economic Reforms
In Argentina, grain exports have been delayed due to strikes. Port workers' unions went on strike for two days in protest against reforms, including labor market changes and the privatization of companies by President Javier Milei. The strike was called off on Tuesday afternoon local time, and work resumed in the important port of Rosario in the evening. Grain exports are one of the main sources of foreign currency in economically struggling Argentina.

Datagro has increased the yield forecast for corn in Brazil by 1 million tons compared to the previous prediction, now at 115.9 million tons. The soybean forecast has also been raised to 147.9 million tons, up from the market bureau's previous forecast of 146.3 million tons. Interest in wheat is declining among Brazilian farmers, according to researchers at Cepea. In the last five years, the wheat area has increased by about 70%. Due to low wheat prices, weather uncertainties, and high cultivation costs, the popularity of wheat is diminishing among Brazilian farmers.

Jurphaas Lugtenburg

Jurphaas Lugtenburg is a market specialist in onions, carrots, and commodities such as wheat, corn, and soybeans at DCA Market Intelligence. He combines his degree in business administration with a passion for farming.
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