Analysis Grains
Kremlin sees potential in grain exports via Baltic Sea
Russia has ambitious plans for grain exports. Not only does the Kremlin want to increase grain exports by 50% in 2030, it also wants to become less dependent on the routes over the Black Sea. In the southeast of Australia, it was chilly. So chilly, in fact, that the temperature dropped below zero. Not exactly favorable weather for the winter wheat in this region that will need to be harvested in just over a month. Together with drought in the west of the country, estimates for the Australian wheat harvest could turn out to be overly optimistic.
The December contract for wheat on the Matif closed €0.75 higher at €221.25 per ton yesterday. On the other side of the pond in Chicago, grain prices closed in the red. Wheat lost 0.9% and ended at $5.84¼ per bushel. Corn's loss was limited to 0.5% and the December contract closed at $4.13¼ per bushel. Soybeans were the biggest decliner on the CBoT, dropping 1.2% to $10.41 per bushel.
Russia continues to occupy European grain traders. SocEcon has slightly lowered the harvest expectation for wheat in Russia to 81.8 million tons. This was 82.2 million tons in the previous forecast.
Export via the Baltic Sea
The Kremlin announced plans yesterday to increase grain exports. By 2030, Russia aims to export 50% more grain. To achieve this, the country wants to tap into new markets in Latin America and Africa and overhaul logistics. The Kremlin intends to significantly expand export facilities on the Baltic Sea. Currently, Russia is highly dependent on ports on the Black Sea. Since the war in Ukraine, that route has become riskier. However, of the 62 million tons of grain that Russia exported in 2023/24, 90% went through the Black Sea and only 2.4% via the Baltic Sea.
Transport via the Baltic Sea has another advantage over the Black Sea. The depth in the Black Sea and its branch, the Sea of Azov, is limited. This is not a problem for transport to traditional Russian export destinations in the Middle East and North Africa. Larger ships are desired for transport over longer distances, which can be accommodated on the Baltic Sea. One disadvantage for the Kremlin with the Baltic Sea is that it is surrounded by NATO countries.
Late Frost
Frost has caused damage to winter wheat in Australia. In the state of New South Wales, in an area of about 1.2 million hectares of wheat, the temperature dropped to 2 degrees below zero. Late in the growing season, frost can cause significant damage to winter wheat. Wheat harvest usually begins in November in Australia. The exact extent of the damage is difficult to determine at this time but could result in a significantly lower yield according to various local sources. Drought has been a problem in western Australia for some time. With the frost in the southeast of the country, the total wheat harvest could end up well below the previously predicted 31.8 million tons according to various analysts.
In the US, concerns about drought are easing slightly. For corn and soybeans in the corn belt, the growing season is coming to an end, and dry weather is particularly favorable for the harvest. The area of wheat in a drought region has decreased according to the new drought monitor. Half of the winter wheat is in a region where it is too dry, down from 58% last week. In the heart of the winter wheat belt - the northern part of Texas, Oklahoma, and Kansas - it remains extremely dry.
