European market
Once again, geopolitics was in the spotlight on the grain market yesterday. In addition to the confirmation of an upcoming trilateral negotiation meeting between Ukraine, Russia and the United States in Abu Dhabi, market participants reacted yesterday to Russia’s authorization for grain vessels to leave the Sea of Azov until November 15. It should be recalled that Russia’s closure of the Kerch Strait on July 10 was one of the first factors behind the bullish momentum seen in the wheat market over recent months.
The situation in the Black Sea remains very unclear. Nevertheless, optimism surrounding a hypothetical resumption of flows is dominating the market and continues to erode the risk premium embedded in wheat prices on Euronext and Chicago.
Euronext Dec 26 wheat therefore fell to a new low not seen since early July at 223 €/t before closing at 227 €/t, ultimately limiting the decline to -1.50 €/t. Corn, dragged down by wheat and sensitive to any hypothetical resumption of Ukrainian export flows, posted a steeper loss at the close, down -3.75 €/t to 259.50 €/t on the Mar 27 contract.
Rapeseed remains highly volatile. It is caught between the bearish influence of grains and expectations regarding the Black Sea situation on the one hand, and firm crude oil prices on the other. As much as 8 €/t separated yesterday’s high and low on the Euronext Feb 27 contract, which closed slightly higher, up +1.75 €/t.
The Fed meeting concluded yesterday, as expected, with interest rates maintained at last month’s level, with no guidance regarding the future path of rates. As he has always said since taking the helm of the Fed, Kevin Warsh aims to say as little as possible about the future direction of Fed rates. His silence yesterday regarding future rate hikes was interpreted as slightly dovish, leading to a stabilization of the dollar at current levels. After hitting a low of 1.1113 yesterday, the euro/dollar exchange rate is back to 1.1140 this morning. Ahead of the ECB meeting this Thursday, the euro remains primarily weighed down by concerns over French debt.
American market
As always, the Chicago SRW wheat contract is the most affected by developments related to the conflict between Russia and Ukraine. Wheat prices plunged again yesterday following reports that vessels stranded in the Sea of Azov by Russia since July may be allowed to leave until November 15. Dec 26 SRW wheat has therefore returned to the psychological level of 6 $/bu. This marks the ninth consecutive week of decline for the contract, which has lost -24 % in just two months.
In such a bearish environment, the market will be highly sensitive to the weekly U.S. export sales figures released by the USDA on Thursday, looking for any sign of a recovery in activity for U.S. wheat.
Corn and soybean prices remained under pressure from wheat yesterday. Corn nevertheless managed to rebound and closed slightly higher in Chicago, supported by an increase in ethanol production and a decline in weekly ethanol stocks in the United States.
In soybeans, the USDA’s announcement of a new weekly sale of 120,000 t to an unknown destination was not enough to prevent another session of losses.
Black Sea market
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