Grain Spreads: Escalations Continue

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Commentary

Corn, soybeans, and wheat were stronger in Friday’s session with wheat leading the charge higher. Yesterday we saw market pressure following news Ukraine had presented Russia with a peace proposal, but this morning it was reported Russia had rejected the offer. This brought managed money buyers to several markets, including the ag contracts. Taiwan was in and booked US wheat overnight as the Black Sea remains closed for business. Drought continues to impact the European Union with both Germany and France seeing grain crop stress. Germany is predicting an 11% smaller wheat crop this year and the French corn crop is rated just 29% Good/Excellent, a 2% drop in the past week. Major crop buyers across Asia are turning to other suppliers in response to intensifying attacks in the Black Sea, which are crimping exports from both Russia and Ukraine, Bloomberg reported. Ukraine’s grain exports in the first part of August slumped 75% from a year earlier, and Russian shipments this month are expected to be less than half the five-year average. . Russia’s Novo port remains closed after the Ukraine drone attack earlier this week and Ukraine added another port closure to the Russian list with Ust-Luga. This port is on the Baltic Sea which is one of Russia’s major ports on the Baltic. This is yet another demonstration of Ukraine’s ability to strike any of Russia’s export infrastructure virtually anywhere in the country, blocking its ability to export commodities.  US and European wheat markets rallied double digits, with the US the strongest market. Funds took long positions in KC and Chicago to anticipate further shipping disruptions this weekend in my view. Conab estimates that Brazil will import the most wheat it has in 20 years during the 26/27 season with 7.1 million metric tons. This demand could be potentially steered to the US as one of the viable suppliers with Russia on pause. No trade recommendation this weekend.

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Sean Lusk

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Walsh Trading

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