Ukraine-Russia grain shipping corridor deal pushes CBOT futures lower

The factors at play were mostly the same that have been impacting the market over recent months - the northern hemisphere harvest, spring crop conditions, international demand for grain, and the potential grain corridor out of Ukraine.

The Egyptian General Authority for Supply Commodities was in the market again early last week. The tender was for offers of imported wheat from the United States, Canada, Australia, Argentina, and Brazil.

This was initially supportive news to prices, particularly given no Black Sea or European Union origins were included, which is highly unusual. Some suggest it may have been political, trying to win goodwill with the Biden administration.

In any case the tender was subsequently cancelled citing the "high prices of offers presented compared to estimated prices". Hence by the end of the week it was a bearish factor on CBOT values with new tenders expected to include Black Sea and EU origins.

Some reports of dry conditions through the EU and US spring crop areas were also supportive early in the week as the corn crop enters the critical silking stage.

The United States Department of Agriculture's weekly crop progress report as at July 18 had the US corn crop rated 64 per cent good to excellent versus the five-year average of 66pc.

The US spring wheat crop was rated 71pc good to excellent versus the five-year average of 54pc.

So as far as the USDA estimates go, US spring crops are looking reasonable and on track in terms of crop maturity. This has been playing a part in the downward price trend over recent weeks.

But the market is wary of tight balance sheets across ag commodities generally and while the crops look reasonable, they are needed, and the market remains focused on the weather forecasts.

Reports of the Ukraine grain corridor being agreed to at the end of last week saw CBOT wheat lose A$23 a tonne on Friday night.

After this announcement Russia began bombing Odessa, a key export port out of Ukraine.

Hence while a deal may have been done on paper, the practicality of executing vessels from the area continues to look very insecure and problematic.

Australia remains a safe and reliable origin for a world requiring grain. The result is our grain remains highly sought after.

Grain values trading within Australia continue to be stronger than the fall in CBOT wheat indicates, and much stronger than prices indicated by published bids.