Wheat prices on global exchanges have seen an uptick of 2-4% at the start of the week, defying the bearish USDA report. The surge can be attributed to the delayed planting and poor state of crops in the United States’ primary agricultural regions, potentially leading to a lower harvest compared to the previous year.
U.S. Wheat Planting Status
As per data provided by the National Agricultural Statistics Service (NASS) of the USDA, only 40% of the U.S.’s spring wheat acreage was planted as of May 14th, with seedlings obtained from merely 13% of these. This falls short of the 5-year averages which stand at 57% and 23%, respectively. In states like North Dakota and Minnesota, seeding rates are twice as low as the average.
The condition of winter wheat crops remains worrying, with only 29% classified as being in good or excellent condition. Despite recent rainfall, states like Texas, Kansas, and Oklahoma haven’t seen substantial improvements in crop conditions. In these states, only 20%, 10%, and 11% of crops, respectively, are in good or excellent condition.
U.S. Wheat Exports
Between May 5-11, the U.S. exported 242.3 thousand tons of wheat, making the total for the season 18.7 million tons, approximately 89% of the USDA’s 2022/23 forecast. The USDA’s May forecast for 2023/24 suggests that U.S. wheat exports will see a minor increase of 0.3 million tons to 45.2 million tons. However, given the poor crop conditions and delayed planting, the actual figure might fall short.
Wheat Futures and Prices
Wheat futures saw a rise in prices recently. In Chicago, soft winter SRW wheat rose by 4% to $242.8/t, hard winter HRW wheat in Kansas City increased by 2.4% to $330.1/t, and hard spring HRS-wheat in Minneapolis grew by 3.2% to $320.9/t. Paris Euronext’s September wheat futures rose by 2% to €239.5/t or $260.7/t. In contrast, July futures for Black Sea wheat in Chicago remained stable at $265.75/t.
Impact of the Grain Corridor on Global Wheat Prices
The disruption in the grain corridor’s operation is bolstering American and European wheat prices, despite Ukrainian wheat supplies being significantly less than those from the Russian Federation. From May 1-15, Ukraine exported 582,000 tons of wheat, totaling 15 million tons in the season, in line with USDA’s prediction.
According to Ruagrotrans, the Russian Federation exported 1.6 million tons of wheat from May 1-11, leading to an increase in the export forecast for May (including EAEU countries) from 4.1 to a record 4.4 million tons. As a result, the USDA increased the wheat export forecast for the Russian Federation in 2022/23 by 0.5 to 44.5 million tons.
Wheat Prices and the Future Outlook
Export prices for Russian wheat with 12.5% protein for May-June delivery fell to $250-255/t FOB, while Ukrainian food wheat for delivery to Danube ports (since purchases in Black Sea ports have been halted) fell to $170 -$180/ton.
The delay in spring wheat sowing in Canada, the U.S., and the Russian Federation, particularly in Siberia, due to cold weather and rains, could result in a reduction in the sown area or a decline in yield from late crops. This situation is a further cause for concern for global wheat supply in the upcoming season, potentially exerting upward pressure on wheat prices.
The Global Wheat Market: A Look Ahead
The current state of wheat planting in the U.S., coupled with similar delays in Canada and the Russian Federation, can have significant ripple effects on the global wheat market. The delays, primarily caused by unfavorable weather conditions, could decrease the total area planted and subsequently lower crop yield.
This decrease in supply might not be offset by the current global wheat reserves, potentially leading to inflated prices. Importing countries would then have to brace themselves for increased costs, possibly impacting food security in regions heavily reliant on wheat imports.
Weather patterns in the coming months will be crucial in determining whether the planting delays can be recouped. If weather conditions improve, farmers may be able to speed up their planting efforts and mitigate some of the potential crop yield losses.
In conclusion, the current challenges facing the U.S. wheat industry underline the importance of diverse and resilient global food supply chains. The world will be keenly watching the developments in the wheat industry, given the commodity’s integral role in global food security.