Russia’s President Vladimir Putin, who has sought support from BRICS leaders amid his standoff with the West over the war in Ukraine, said that BRICS’ average economic growth in 2024/25 would be 3.8 per cent, compared to global growth of 3.2-3.3 per cent.

“The trend for the BRICS’ leading role in the global economy will only strengthen,” Putin said, citing population growth, urbanization, capital accumulation, and productivity growth as key factors.

Russia, the world’s biggest wheat exporter, proposed the creation of a BRICS grain exchange which could later be expanded to trade other major commodities such as oil, gas and metals.

“BRICS countries are among the world’s largest producers of grains, legumes, and oilseeds. In this regard, we proposed opening a BRICS grain exchange,” Putin told the leaders.

He added that the exchange “will contribute to the formation of fair and predictable price indicators for products and raw materials, considering its special role in ensuring food security”.

“The implementation of this initiative will help protect national markets from negative external interference, speculation, and attempts to create an artificial food shortage,” Putin said.

Other leaders backed the creation of a common cross-border payments system, which would help BRICS countries trade with each other, bypassing the dollar-dominated global financial system.

Brazilian President Luiz Inacio Lula da Silva, who took part in the BRICS summit via video conference after a head injury over the weekend, said that it is time for the BRICS nations to create alternative payment methods.

He added that the group’s New Development Bank (NDB) was designed as an alternative to what he called failing Bretton Woods institutions such as the International Monetary Fund (IMF).

India’s Prime Minister Narendra Modi said that he welcomed the steps for financial integration of BRICS countries while China’s President Xi Jinping urged BRICS countries to deepen financial and economic cooperation.

In his speech, Putin also called for the creation of a BRICS investment platform, which will facilitate mutual investment between BRICS countries and could also be used for investment in other countries in the Global South.

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If Egypt is able to buy wheat at knock-down prices, the lower import bill could help in efforts to keep the economy afloat.

The country has needed the support of the International Monetary Fund and friendly Gulf countries who have injected billions of dollars in loans and investments in 2024 alone.

“My colleagues (at the government) are seizing this opportunity to buy what we need amid the current situation in the global market,” Finance Minister Ahmed Kouchouk told reporters on Tuesday, adding that not all repercussions of the global sell-off wave were negative.

The tender marked a change in the purchasing strategy of state grains buyer, the General Authority for Supply Commodities (GASC), which typically is for one or two months rather than for the October to April shipment period covered in this tender.

Egypt has been one of the world’s largest wheat importers, mainly to provide subsidized bread for tens of millions of its people. GASC alone imports some 5.5 million metric tons of wheat annually for bread subsidies.

Egypt typically imports most of its grain from Russia, which made up nearly 70 per cent of all its wheat imports in 2023.

Traders expect GASC to buy from Russia and other Black Sea origins in the upcoming tender.

“This is a very strange tender,” said one trader. “We usually submit bids for shipping a month or two in advance. It would be very difficult to submit a freight offer six or seven months in advance.”

Some traders were sceptical about Egypt’s ability to fulfil its ambition.

“I doubt if they will be able to get the full volume,” said another trader. He said the 270-day payment term was off-putting.

A third trader said trading houses will want the business and will just add the banking costs of the 270-day payment delay to their price offers.

GASC said it aims to maintain a wheat reserve sufficient to meet nine months of demand, with reserves in July standing at 6.9 months.

“It appears that Egypt wants to get big supplies in storage or at least in its books. This could be due both to Egypt’s financial problems or the threat of greater war in the Middle East,” a European trader told Reuters.

“They could shoot themselves in the foot by buying in advance but then having to regret if prices fall later.”

Shortly after GASC’s announcement, European wheat futures rose on Tuesday.

—Reporting for Reuters by Sarah El Safty, Nadine Awadalla, Mohamed Ezz and Michael Hogan

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“The weather forecast for the Black Sea region is a big red flag,” said Chris Hyde, a meteorologist at U.S.-based Maxar, with dryness and below-normal rains expected for July and August likely to crimp the region’s key corn and sunflower crops.

Record temperatures in major global growing regions have delayed planting and hurt developing crops as the impact of climate change intensifies, with vast swathes of farmland in Russia, China, India and the United States experiencing extremely hot conditions and below-normal rainfall.

Global wheat prices jumped to a 10-month high in May after adverse weather trimmed yields for the maturing crop in Russia, the biggest exporter.

Hot weather in southern Russia will hit crops because of a lack of soil moisture, with lower precipitation and heat also expected in Urals, Western Siberia and Transbaikalia, Russia’s Hydrometeorological Centre said in a forecast.

Southern and eastern Ukraine have also seen hot and dry weather, with precipitation between May 1 and June 10 only 20-50 per cent of normal, according to the state weather forecaster, with drought hindering development of winter and spring crops in parts of the Kharkiv and Donetsk regions.

“The month of May in Ukraine turned out to be one of the driest for the last 30 years,” state forecasters said. “In northern regions, in particular in Zhytomyr, hail resulted in damage of spring crops such as corn, soybeans and sunflower.”

In the United States, a top food exporter, intense heat has gripped parts of the east coast, while excessive rains in the key Midwest growing region and forecasts for more wet weather have raised fears of floods.

“In the Midwest, the focus is shifting from heat to too much rain, which could result in flooding on corn and soybean producing areas, especially in the Upper Midwest,” Hyde said.

China, India weather seen improving

In Asia, ample rains are expected to alleviate severe dryness in parts of China, a top soybean buyer, while rains during India’s monsoon, running a fifth below normal, are likely to recover, boosting agriculture in the world’s biggest rice exporter and top edible oil importer.

“China’s corn and soybean producing north and east has been dry and a worry,” said Hyde. “But the weather is expected to be normal to slightly above normal precipitation in the July-September period, which will be beneficial for crops.”

China’s meteorological centre told Reuters that parts of the north, northeast and western provinces will see higher precipitation in July to September, which will encourage crop growth.

“But the precipitation will be intense in some areas, there will need to be vigilance about rapid shifts in droughts and floods,” it said, adding that the higher humidity may also raise the risk of crop diseases and pests.

In India, the monsoon is advancing after stalling for more than a week, a weather department official said.

“It has now gained much-needed momentum for its advance into the northern plains. In the next few weeks, we expect several spells of heavy rainfall that will erase the rainfall deficit. July is shaping up to be promising.”

The weather in Australia is expected to be normal, with some areas getting higher than average rains, boosting the wheat crop outlook, while mainly normal weather is also forecast in coming months in Argentina and Brazil.

—Additional reporting for Reuters by Pavel Polityuk in Kyiv, Olga Popova in Moscow, Mei Mei Chu in Beijing and Rajendra Jadhav in Mumbai.

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Frosts have damaged crops in many regions this year while there has also been a drought in some areas, leading analysts to downgrade forecasts for this year’s harvest.

Agriculture minister Oksana Lut said on Monday that Russia may declare a nationwide emergency possibly, as soon as the end of this week. Emergency regimes have already been introduced in 11 regions.

Igor Pavensky, Rusagrotrans’ marketing director, estimated that the drought and May frosts affected regions that account for up to 40 per cent of Russia’s winter wheat area.

“It (exports) will probably not be as widespread as in the current season,” Sergeуchuk said, speaking during the St. Petersburg international economic forum.

VTB is one of Russia’s largest lenders to the agricultural sector.

Sergeуchuk said Russia was present in grain markets such as Mexico, Indonesia and Vietnam in the current season where other exporters usually play a big role while adding it would try to ensure it continued to play a leading role in supplying the Global South.

Russian grain exports this season, which will end in less than a month, have already totalled 65 million metric tons to date, with a record 70 million tons expected at the end of the season, Sergeуchuk said.

The Ministry of Agriculture has forecast that in the 2024/25 season grain exports from Russia will amount to about 60 million tons.

Russia is the world’s largest exporter of wheat.

According to analytical agency ProZerno data, from July to November 2023 the largest importers of Russian grain were Turkey (over 3.5 million tonnes) and Egypt (2.7 million tonnes).

Russia supplied about 700,000 tonnes of grain to Indonesia, nearly 382,000 tonnes to Mexico, and just over 131,000 tonnes to Vietnam. All of them bought wheat, Vietnam also bought corn.

VTB officially exited the grain business a year ago, announcing the sale of a stake in Demetrа, one of the largest grain holdings.

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The world’s second-biggest corn grower reported a record corn crop of 288.8 million metric tons last year but continues to aim for larger output amid rising tensions with some trade partners, climate-related disasters and military conflicts.

China aims to boost grain production by 50 million metric tons by 2030, with a focus on soybeans and corn, although state media have reported production hitting a bottleneck.

Good prices and government subsidies have encouraged farmers to expand winter wheat and rapeseed planting, said Pan Wenbo, the ministry’s director-general of cultivation management. These crops are usually harvested around April to May.

“I went to the main producing areas of Hebei, Shandong, Henan and Anhui, indeed the wheat fields are healthy, robust… good seedlings lay the foundation for a good harvest,” Pan said at a press conference.

The area of winter rapeseed planting is expected to increase by more than 2 million mu (133,333 hectares), extending last year’s rise, he added.

The ministry said China’s consumption of agriculture products will continue to recover, with demand driven by a rebound in the tourism and restaurant sectors.

Demand momentum will extend as the economy bounces back more, said Lei Liugong, director of the agriculture ministry’s market and information department.

However, demand from the manufacturing and wholesale sectors has not recovered to expected levels, Lei added.

—Reporting for Reuters by Mei Mei Chu and Chen Aizhu

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“We are trading at levels unseen since 2022. I just don’t see a reason why anything can rally, unless there’s something really unforeseen,” Palmer stated.

“The [speculative] funds rule the roost these days, and whatever the funds are going to do, they’re going to take the market wherever they want to,” he added.

In the Commitment of Traders report from the United States Commodity Futures Trading Commission the net managed money short position in canola was 120,758 contracts as of Jan. 9. That marked one of the largest shorts since 2018 for the Canadian oilseed.

Meanwhile, Palmer said farmers were long by storing much of their canola.

“The last three years…prices were higher. It’s a total reverse, prices are lower and [farmers] are looking for a miracle play on the upside,” he commented.

One such miracle he said could be a huge jump in exports, which are extremely unlikely at this time.

The Canadian Grain Commission reported canola exports of 2.65 million tonnes 23 weeks into the 2023/24 marketing year were more than one million tonnes behind last year’s exports.

Palmer pointed a major bearish influence on canola – the forthcoming South American soybean harvest, which will be massive despite cuts to Brazil’s output. Initial estimates placed Brazil soybeans at about 160 million tonnes, but extremely dry conditions in the central and northern growing areas plus an excessively wet south hampered the crop’s planting. Now, numerous private consultancies lowered their projections to either side of 150 million tonnes, with one chopping its call to about 135 million.

However, reports said Argentina is set to double its soybean production from last year with expectations at around 50 million tonnes, which more than compensates losses in Brazil.

With such an influx of soybeans to come onto the market shortly, Palmer said decent canola supplies and a lack of demand for the Canadian oilseed, means the outlook in the coming weeks and months is not very good.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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The BDI settled at 1,360 points on Jan. 15, dropping 59 per cent off the high of 3,346 points hit on Dec. 4, 2023, to trade at its lowest level in four months.

The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.

A seasonal slowdown, reduced congestion at Brazilian ports and cancelations of some vessels headed from China to North America were all said to be contributing to the declining rates.

While bulk rates have fallen over the past month, container rates have shot higher. Drewry’s World Container Index (WCI), which tracks container rates, was at US$3,072 per 40-foot container on Jan. 11, 2024 – roughly double where rates stood at the beginning of December.

With more and more vessels diverting away from the Red Sea and taking lengthy detours there were reports of some shipping companies quoting rates as high as US$10,000 per 40-foot container from Shanghai to the United Kingdom, roughly quadruple levels only a week earlier.

Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg. 

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The demonstrations were mainly against the high cost of diesel, expensive insurance rates, European Union measures to protect the environment and pressures on the domestic market from imported Ukrainian agricultural goods.

Convoys of tractors and trucks began gathering six days ago on national roads, mostly near large cities in the EU and NATO state, slowing or blocking traffic.

The protesters’ demands include a moratorium on loan repayments, faster subsidy payments and separate lines at border crossings and the Black Sea port of Constanta for EU lorries and trucks from outside the bloc, including Ukraine.

On Monday, representatives of the largest farm associations and Agriculture Minister Florin Barbu agreed specific deadlines for a series of demands and the associations said they will recommend that protesters go home.

Truck drivers had more negotiations scheduled later this week.

Earlier on Monday, trucks and tractors took position on roads leading to the checkpoints of Siret and Vicovu de Sus on the border with Ukraine, slowing transit, but Romanian border police said customs formalities were still being completed.

The Constanta port authority told Reuters that protests had not disrupted operations. The largest gathering of protesting hauliers was on the outskirts of the capital Bucharest.

Ukraine is one of the world’s biggest grain exporters and Constanta has become Kyiv’s largest alternative export route since Russia’s full-scale invasion in February 2022, with grains arriving at the port by road, rail and barge across the Danube.

Hungary’s agriculture ministry said on Monday eastern EU states Bulgaria, Poland, Hungary, Romania and Slovakia had sent a letter to the European Commission requesting the EU impose import duties on Ukraine grains, citing unfair competition.

Such duties were lifted for Ukraine after Russia’s invasion blockaded its ports, disrupting the transit of grains to global markets.

–Reporting for Reuters by Luiza Ilie.

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The London-based IGC released its first monthly report of the new calendar year on Jan. 11, listing total grain production up from its November call of 1.872 million tonnes. The IGC does not issue reports for December.

Among the changes the council made for January, production increases included Australia from 37 million tonnes to now 39.3 million; Canada up from 55.5 million to 59.1 million; and China now at 434.7 million compared to 426.4 million previously.

Also, the IGC upped its projection on total grain ending stocks from 584.9 million tonnes to 590.2 million.

Global wheat production for 2023/24 was pushed up to 788.3 million tonnes from November’s 786.6 million. Among the notable changes to output were Australia raised 1.1 million tonnes at 25.5 million, and Canada from 29.8 million to now 32 million.

World wheat ending stocks were nudged up from 264 million tonnes in the IGC’s previous report to now 265.6 million.

Global corn output for the current marketing year was raised as well, from 1.223 billion tonnes in the IGC’s November estimates to now 1.230 billion.

There were production increases for China from 280.6 million to now 288.8 million tonnes, and Ukraine from 28.8 million to 30 million. These were offset by a cut to Brazil from 124 million tonnes to 119.7 million.

With the higher corn production, ending stocks were raised two million tonnes at 286.8 million.

The IGC reduced 2023/24 world soybean production from 394.8 million tonnes in November to now 392.4 million. Argentina was boosted from 44 million tonnes to 48.5 million, Brazil was cut from 160 million tonnes to 153.5 million.

Despite the drop in soybean production, the IGC raised ending stocks from 62.2 million tonnes to now 66.1 million. A large part of that came with increasing the carry-in from 53.9 million tonnes to now 57.3 million.

The next monthly report from IGC is scheduled for Feb. 15.

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“If you don’t think the economy is going to be in a substantial slowdown or recession, the prices are undervalued. If you do think we are going into a global slowdown, the prices have probably more room to fall,” Flynn explained.

“I lean more towards the fact that the market is overdone. We’re going to bottom out shortly,” he added, noting that he expects world supplies to tighten in 2024.

Until then, Flynn said the oil market was suffering from “high anxiety” due to the amount of volatility. One case in point was Saudi Arabia cutting its price for oil on Jan. 8, which saw values for Brent and West Texas Intermediate crude oils get hit hard.

In the same breath, he pointed to the risk to supplies that’s added some cost to oil. Namely the attacks on commercial shipping in the Red Sea being carried out by Iran-supported Houthi rebels in Yemen.

“But the reality is we haven’t seen any major oil disruptions. We haven’t lost too many barrels of oil because of this. Admittedly, [shipments] have been delayed around the Red Sea has added to the cost.

Flynn said there were widespread expectations the price of oil would have jumped with the start of the Gaza war and fears the conflict would spread throughout the Middle East. But such has not occurred so far.

He also pointed to the annual “rebalancing of the commodity index funds” with Bloomberg commodity index and the S&P Goldman Sachs index.

“When they rebalanced those indexes, they had to sell some oil. That put further downward pressure on prices,” Flynn said.

He said the hedge funds built a near-record short position in crude oil, which weighed on values.

“They’re betting on a recession. They keep selling in every rally in oil. They are doom and gloom, and they keep pushing the market lower,” Flynn commented.

“On the flip side of that, if they’re wrong, you can see a major reversal in price,” he added, noting colder temperatures will push up the demand for diesel and natural gas.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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