Artem Grebenyuk /

Analysis Grains

'Ukraine should not pick a fight with EU over grain'

June 12, 2024 - Jurphaas Lugtenburg

The declining trend in the wheat market came to an end yesterday. Less rain is forecasted for the Black Sea region than previously expected, making players in the wheat market nervous. In France, drought is not a problem. There is actually an excess of water, as shown in a report from the French Ministry of Agriculture yesterday. Later today, the USDA will release the Wasde report. Analysts expect adjustments, especially for South America.

The September contract for wheat on the Matif closed €7.50 higher at €246.50 per ton yesterday. Wheat also showed recovery on the CBoT. The July contract closed 3.1% higher at $6.26½ per bushel. Corn and soybeans took a step back in the last trading session. Corn lost 0.5% and closed at $4.49¼ per bushel. Soybeans dropped 0.9% to $11.78 per bushel.

The wheat market is a weather market, as was once again clear yesterday. The weather models predict less rain than previously forecasted in the Black Sea region, which did not go unnoticed in the wheat market. An important wheat region in Russia, Rostov, declared a state of emergency yesterday due to drought. The news from Russia did not stop there. The president of the Russian Grain Union estimates that 15% to 30% of the Russian winter wheat area has been damaged by the frost in early May. This is a much higher percentage than the Russian Ministry of Agriculture mentioned. The Kremlin referred to 1 million hectares with frost damage, which is about 4% of the winter wheat area.

Wet and cold spring
In France, the weather is also not cooperating. You are probably familiar with the story: it is wet, cold, and there is little sun. According to the French Ministry of Agriculture, there was 45% more rain in the months of March, April, and May combined than the average. Additionally, there were 20% fewer sunshine hours, and it remained relatively cool. These are ideal conditions for the development of mold. The ministry estimates the winter barley harvest in France at 8.6 million tons, which is 10.7% less than last season. The yield forecast for rapeseed is 4.2 million tons, a decrease of 1.2% compared to the previous season.

Ukraine must respect EU's wishes
Ukraine should not pick a fight with the EU over the export of agricultural products. This call comes from an unexpected source, namely Andriy Verevskyi, the owner of the Ukrainian agricultural conglomerate Kernel. Kernel is one of the largest exporters of sunflower oil in the world and a major player in other agricultural products. "I don't think Ukraine should fight with Poland or other European countries over import duties and protecting the European market," Verevskyi told the Financial Times. "We have enough other export markets like India, Africa, Asia, China, and so on, and I don't think we should jeopardize the relationship between Europe and Ukraine over agricultural products."

According to Verevskyi, Ukraine should respect the wishes of Poland and other Eastern European member states to protect their own market by excluding imports from Ukraine. Ukraine should seek cooperation in more important areas. Several (Eastern) EU member states have played a significant role in providing weapons and hosting hundreds of thousands of refugees.

Tonight, according to Dutch time, the USDA will release the May edition of the Wasde report. Analysts do not expect major changes for corn and soybean production in the US. It is still too early for definitive acreage figures, so the USDA will likely postpone significant adjustments by a month. Shifts are expected for South America. An adjustment in corn is expected in Argentina due to drought. In the April edition of the Wasde, the USDA made hardly any adjustments to the Brazilian soybean harvest due to the floods in Rio Grande do Sul. Some analysts now expect a correction there.

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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