Global Wheat Prices and Political Tensions
Wheat prices, after a dip last week, are witnessing a gradual recovery. This resurgence is attributed to the delay in planting spring wheat in the US, restrictions on Ukrainian exports, and doubts surrounding the continuity of the grain agreement. Ukraine exported 14.5 million tons of wheat in 2022/23MR, in line with the USDA forecast. However, over the next couple of months, it could potentially ship an additional 1-2 million tons.
The ban on wheat supplies to EU countries bordering Ukraine has sparked surprise and concern, particularly given the rising wheat supplies from the Russian Federation over the past five months. The halt of wheat exports from Ukraine due to the obstruction of vessel inspections by Russian representatives in the SCC has not led to a grain shortage in the global market. Russia continues to supply, including to Europe, thus keeping the market stable.
Russian Wheat Exports and USDA Forecast
According to Rusagrotrans’ forecast, Russia can export a record 4.1 million tons of wheat in May, slightly less than the 4.4 million tons exported in April 2023. For the fifth consecutive month, Russian wheat exports exceeded 4 million tons, double the amount exported during the same period last year.
The USDA is slated to publish wheat balances for 2022/23 and 2023/24 MY on May 11. Analysts are expecting a decrease in stock estimates for the next season, a factor that will likely support prices for new crop wheat.
World Wheat Production and Stock Estimates
The UN’s Food and Agriculture Organization (FAO) estimates world wheat production in 2023/24 to reach 785 million tons. The EU is expected to contribute 139.5 million tons, while initial stocks should amount to 309.7 million tons.
As per USDA’s National Agricultural Statistics Service (NASS), as of May 7, 24% of the US land was planted with spring wheat, down from 26% last year and a five-year average of 38%. On the other hand, corn accounted for 48% of the area, up from 21% last year and a five-year average of 42%. Farmers are seemingly opting for corn over wheat, which may result in a smaller-than-predicted area dedicated to spring wheat.
Fluctuations in Wheat Futures Prices
The wheat futures market is experiencing considerable fluctuations. On one hand, July futures for soft winter SRW wheat in Chicago, wheat on the Paris Euronext, and Black Sea wheat in Chicago all fell by 1%, 1%, and 0.3%, respectively. However, on the other hand, futures for hard winter HRW wheat in Kansas City and hard spring HRS-wheat in Minneapolis both rose, by 1.4% and 0.9%, respectively.
Conditions in Ukraine and Impacts on Wheat Crops
In Ukraine, weather conditions are favoring the development of winter wheat crops. However, heavy rainfall and low temperatures are leading to the spread of diseases, necessitating increased expenditure on fungicides by farmers. The implications of these climatic and economic factors on the overall wheat trade and prices are yet to be fully seen.