“It’s the return of geopolitics,” said Sébastien Poncelet, analyst specializing in cereals at Argus Media France, on Wednesday.
“The wheat market had relaxed after theelection of Trump », which had promised to resolve the conflict in Ukraine within 24 hours, and “has found support factors since Friday, with the escalation of tensions in the Black Sea”, he notes.
It is essentially the Chicago Stock Exchange which has set the tone since the results of the American election.
Last week's losses were practically erased by the rebound of the last few days: on Euronext, soft wheat went from less than 210 euros per tonne a week ago to 218 euros closing Tuesday evening. And in Chicago, bread grain closed higher at $5.5 per bushel (about 25 kilograms).
For Dewey Strickler, analyst at Ag Watch Market Advisors, “wheat is up because the Biden administration authorized Ukraine's use of long-range missiles in Russia, which stirred up the market.”
The Ukrainian army fired long-range ATACMS (Army Tactical Missile System) missiles on Russian territory on Tuesday, for the first time, after the green light from Washington to the use of these weapons.
The head of Russian diplomacy, Sergei Lavrov, promised Tuesday an “appropriate” response to these shots, denouncing the involvement of the United States in these strikes and seeing it as a “new phase” in the conflict.
This heatwave raises fears of a disruption in the supply of cereals in the Black Sea and therefore contributes to the rise in wheat prices, according to Mr. Strickler.
“Since the start of the week, (the market) has integrated more geopolitics and the fundamentals of supply and demand and less the uncertainty of trade policy”, with the prospect of a increase in customs duties linked to the election of Donald Trump, notes Michael Zuzolo, of Global Commodity Analytics and Consulting.
Soy in the red
For him, this “geopolitical risk premium” on the wheat market “seems to compensate very effectively (…) the state of American winter wheat crops”, which has clearly improved after the rains recorded in the Midwest since the beginning of the month.
According to figures from the United States Department of Agriculture (USDA) released Monday, 49% of American wheat is in “good” or “excellent” conditioncompared to 48% last year at the same time.
On global markets, “prices will likely experience strong fluctuations,” depending on the volumes of grain produced in Russia and Ukraine, estimates Jason Roose of US Commodities.
According to the latest USDA report, Russian wheat production expected at 81.5 million tonnes in 2024-24 and its exports estimated at 48 million tonnes, a high level despite an expected drop in the harvest of several million tonnes.
The USDA estimates the Ukrainian harvest at around 23 million tonnes, but the Ukrainian Ministry of Agriculture is more optimistic: it now estimates its future wheat harvest at 25 million tonnes, in particular due to an increase in sown areas. .
In a wheat market which remains “balanced”, with sufficient supply, the big unknown will be the volume of the harvest in Australia : “We have estimates ranging from 24 to 34 million tonnes”, with very heterogeneous yields depending on the region, some having suffered too much rain or frost, notes Sébastien Poncelet.
Less sensitive than those of wheat to this increased volatility, corn prices were supported by still significant sales from the United States.
On the other hand, soybeans were on a downward trend, the result of a “rather mild weather in South America”, which increases the chances of good harvests and therefore weighs on prices, underlines Dewey Strickler.
The Brazilian harvest promises to be another record this year, with the Brazilian association Abiove counting on nearly 168 million tonnes and the USDA on 169 Mt.
