Global wheat markets enter a critical time

Foreign news, July 5: July is a key month of the year for wheat markets as the pace of exports accelerates as the Northern Hemisphere harvests wheat. With exports from Ukraine still stalled, market attention turns to how the Russia-Ukraine conflict will affect exports in 2022/23 and how other countries will make up the shortfall.

With Black Sea ports closed, Ukraine has turned to rail and inland terminals to export its products. Meanwhile, Russia is harvesting its highest wheat production on record, but logistical and financial constraints triggered by Western sanctions remain key factors affecting the size of its exports. The pace of Black Sea wheat sales may be more of a concern than ever, as Russia and Ukraine typically account for more than a quarter of global wheat trade. Although wheat prices have fallen recently, they are still well above the historical average for the same period.

Dan Bass, president of Chicago-based Agricultural Resources, said Russia intends to export wheat, but it won’t be that easy. As the world’s number one wheat exporter, Russia’s wheat exports are now largely normal and are exported to traditional customers. With new wheat coming in, the next few months will show whether Russia can sell a lot of wheat in the peak export season. The current export outlook for Ukraine remains bleak, with little progress yet in restarting seaborne trade and port closures likely limiting grain exports to less than half their potential. Any loss of exports from the Black Sea region would mean importers would rely more on alternative suppliers such as the EU. Even U.S. wheat has become more competitive. U.S. wheat is usually one of the most expensive supplies. There are already signs of a shift in trade. Egypt ordered 815,000 tons of wheat through a tender last week, including 350,000 tons of French wheat, twice the amount of Russian wheat purchased. Consulting firm Agritel said Egypt’s large purchases of French wheat are not unusual, especially at the beginning of the year, when Egypt usually buys wheat from the Black Sea. Recently Egypt also bought its first ship of U.S. soft red winter wheat since 2019.

Despite the large supply of Russian wheat, its exports face challenges. The West has not officially sanctioned Russia’s agricultural trade, but unofficial measures have prompted some banks and shipping companies to reduce credit lines and services to Russian companies. This makes the outlook for Russian exports difficult to predict. Chicago Agri-Resources forecasts Russian wheat exports for the year at about 32 million tons, the Food and Agriculture Organization of the United Nations (FAO) expects 35 million tons, close to the previous year’s level, the U.S. Department of Agriculture expects Russian wheat exports to approach a record 40 million tons, and SovEcon forecasts exports to exceed 42 million tons. In any case, Russia needs to speed up shipments to reach its export potential, and the Russian government’s change in the way export duties are calculated last week is likely to boost sales prospects.

Source: Boeing Guru

Post time: Jul-13-2022