The weather once again becomes the compass of the markets

The weather once again becomes the compass of the markets

AFP

Soft wheat harvests are starting in Europe, between promises of a fantastic harvest in Russia and uneven yields in France, with rather favorable conditions in the United States: the flows are accelerating and the weather is once again the compass of the markets. (Article originally published on June 29 at 5 p.m.)

HarvestIn the great European plains, the wheat harvests are starting. (©Pixabay)

Lare wheat and corn pricesin sharp decline since mid-June, rebounded on Tuesday for various reasons, according to an analysis by the firm Agritel: on the Chicago Stock Exchange, the market was rebalancing after significant sales and before a new report from the United States Department of Agriculture (USDA) which should record an “increase in corn acreage to the detriment of soybeans” in the United States.

On Euronext, the rebound was also due to a return of certain buyers to the market, such as Algeria, which would have bought a huge shipment (740,000 tonnes of wheat), and Tunisia (100,000 tonnes of wheat and 50,000 ‘barley). Pakistan has launched a tender for 500,000 tonnes of milling wheat.

Return from China

Another key factor is the lifting of health restrictions in China “Most of the flows entering the commodity market are determined by algorithms, which read the titles (of information sites) and technical signals (thresholds or movements). And headlines that say that China, which is the world’s largest importer of raw materials, is reopening, that can only be positive (for prices), ”explained Arlan Suderman, of the StoneX platform.

Is the “correction” complete? On the American market, “It will depend a lot on the rest of the summer, particularly the next few weeks for corn, because pollination is starting,” says Jack Scoville of Price Futures group.

“Everyone is talking about a possible recession and everyone has that in mind, because grain prices are really high,” despite the correction, he says.

The downward trend of the previous weeks was explained by a cocktail mixing “improvement of climatic conditions”, “relatively frozen situation in Ukraine” and “growing fear of a recession”: factors which are “always present”, adds Edward de Saint-Denis, broker at Plantureux & associés.

harvest

In the great European plains, the wheat harvests are starting. In France, the leading European producer of soft wheat, the harvest is on the way correct in volume but uneven in qualityseveral regions having been affected by episodes of hail or strong heat in the middle of the grain filling period.

In Russiathe harvest promises to be record with forecasts of 88 million tonnes, against around 75 million last year.

But many operators remain reluctant to engage boats on the Black Sea and the ruble is at “the highest for seven years”, a consequence of the obligation to treat transactions in rubles. To promote its exports, Moscow is reviewing its method of calculating export taxes (currently at 146 dollars per ton of wheat), according to Agritel.

“Barter System”

Thanks to the resumption of purchases on the markets, new flow logics are appearing. Russia pledged on Monday to guarantee Brazil “an uninterrupted supply” of fertilizer, essential for the powerful Brazilian agri-food industry which imports 80% of its fertilizer consumption, including a quarter from Russia.

“Is it about finding a free trade Agreement, including for example Brazilian ethanol, or the sign of a desire to direct the flow of agricultural raw materials towards potentially allied countries such as China? asks Edward de Saint-Denis.

“Egypt, on the other hand, bought Indian wheat and pledged to supply fertilizer to New Delhi. This state-to-state agreement is similar to a barter system. And offers a response to the insolvency of certain states, ”he notes.

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