The Black Sea Grain Initiative is rapidly closing in on its deadline with all parties seeming to be squabbling over the duration of the updated agreement. Ukraine has clearly stated it would settle for 120 days (it originally wanted 365 days), and Russia is sticking to only offering 60 days. When the average clearing rate for a vessel leaving the Ukrainian port of Odesa is roughly 5-6 weeks due to slow inspection times, it leaves plenty on the table when it comes to the security of delivery. Negotiations continue but the general consensus is that the corridor will continue in some form or another.
In the past couple of days, global economies have been rocked by the news of several large banks foreclosing. The largest of these, Credit Suisse was teetering on the brink but is believed to have had an 11th-hour reprieve of a $100B loan. Crude oil, as an economic health indicator, slipped below US$75/barrel before staging a small bounce overnight. Now we can add macroeconomics to the raft of price influences in the same basket as geopolitics, managed money, and the fundamentals.
Expect the weather to have more influence on market direction over the next couple of weeks. The USDA estimates that 55% of the US Hard Red Winter (HRW) is experiencing some kind of drought. The current forecast continues to show the exact areas that need the rain will miss out. Expect this to become a bigger issue as the temperature warms up (assuming no reprieve in rainfall).
Agricultural powerhouses of France and Germany, both received widespread rain in the past week, kickstarting their Spring growth nicely. With crops breaking dormancy, further rain will be critical to make up for the winter deficits.
The week ahead….
The wheat market will take its immediate direction from the decision around the grain corridor. Assuming the corridor is renewed, we doubt that the market will fall too much, but it may unwind the gains seen in the past week.