Miller Magazine Issue: 130 October 2020

56 COVER STORY MILLER / OCtOber 2020 of Saudi Arabia for Russian wheat followed by unrelent- ing talks of Algeria doing the same. Deliveries are yet to start, but speculations are widespread that whereas France due to drought slashed wheat crop this season and can allow itself the luxury to miss Algerian market altogether, next season it is bound to suffer greatly, if Russian wheat indeed enters into competition with his- torically dominant French origin at the Algerian market. On the other side of the Atlantic, CBOT wheat also went higher during late August, partly supported by China's ongoing grain buying spree. However, price moves in Chicago have been milder and the market as a whole has behaved rather as a follower, not a leader. CBOT did react to corn down- grades in the States (derecho, dryness in western Iowa with ensuing down- grades in quality and yields) and, in part, to the developments in other wheat markets, but these moves only accentuated its current role of a price trend follower. European grains futures prices on the MATIF and the Black sea market have been much more intercon- nected. MATIF has promptly reacted to the underlying fundamentals in the Black Sea region, with a strong rally in the last weeks of August and first weeks of September. This year, the grain trade has not been able to build up big long positions of cheap ex-harvest wheat due to the loss of appetite by banks to provide credit. Due to micro and macro factors, banks fell out of love with agriculture this season. Borrowing money for commodity trading has become harder as banks tighten their lending standards. In my view, this will make the market more re- active to the future price moves. This also means, that no matter how sharp price swings are, they allow to capture profit margins to a much lesser extent. Against this back- ground, consistency is the key to success this season. Source: Refinitiv