The wheat market rose sharply this week - driven by geopolitical tensions, weather-related risks and surprising twists and turns in global trade. The smouldering conflict between Israel and Iran caused ongoing nervousness. Traders feared supply bottlenecks for fertilizers, as important producers from the region could be affected. Even though neither Israel nor Iran play a significant role in global wheat trade, the escalation of the situation has significantly increased the perception of risk on the agricultural markets. While there were signs of a diplomatic solution at the beginning of the week and the markets fell slightly as a result, a sharp turnaround in US foreign policy caused a new price surge. Statements about possible US military involvement on Israel's side immediately prompted hedging purchases. There was also brisk activity on the physical market. Algeria's major order for several hundred thousand tons of wheat in particular drew attention to its international competitiveness. Despite high French expectations, Black Sea goods once again prevailed - a damper for EU exporters. The US winter wheat harvest was delayed due to weather conditions, while reports of drought and emergencies in key growing regions in Russia caused additional uncertainty.
The maize market was comparatively calm last week - at least at first glance. While wheat was strongly driven by geopolitical tensions, weather conditions and export figures were the main factors in the maize market. In the US growing regions, regular rainfall continues to ensure good growing conditions. Corn stocks are in good shape, giving rise to hopes of an above-average harvest. The price trend was correspondingly subdued - even despite guidance from the wheat market. Nevertheless, there was impetus from the export side: US exports are still running at full speed, with weekly volumes once again well above the previous year's level. Additional tailwind was provided by a slight increase in demand for ethanol on the export side. On Euronext, the overall picture for maize was more positive this week.
ZMP Live Expert Opinion
The grain markets remain susceptible to geopolitical developments, particularly in the Middle East. Should the Israel-Iran conflict escalate further, new supply risks could drive up prices. Today's news that Iran is considering closing the Strait of Hormuz if the USA goes to war would cause major distortions. A significant proportion of the world's fertilizer passes through this bottleneck. At the same time, the market is facing the important phase of the US harvest, during which extreme weather conditions can cause surprises at any time. Export demand remains a key stabilizing factor - especially for corn. Overall, volatility is likely to continue, with short-term fluctuations around weather, politics and fundamentals.
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