Wheat markets fall in anticipation of grain deal extension

Wheat markets fall in anticipation of grain deal extension

Updated: 2 months, 16 days, 23 hours, 18 minutes, 0 seconds ago

Global wheat prices have dropped further in expectation of a renewal of the Black Sea grain deal.

The deal is due to end on 19 November and an extension was still to be agreed between Russia, Ukraine, and the United Nations on Wednesday 16 November.

However, advisers are suggesting the deal is likely to be signed and global wheat markets have been adjusting down accordingly.

See also: How to adapt management to specific winter wheat varieties for spring 2023

Russian consultancy firm SovEcon suggested wheat was trading lower globally amid grain deal renewal expectations.

May 2023 UK feed wheat futures opened at £261/t on 16 November, down from £15.5/t on week-earlier levels.

Chicago wheat futures have also fallen, with May 2023 wheat futures down by US$24.43/t (£20.48/t) since the beginning of the month.

UN data shows more than 10m tonnes of food commodities have been exported from Ukraine since the deal was launched in July, including 3m tonnes of wheat.

UK markets

Domestic futures had followed European grain markets down due to expectations that the Ukrainian export corridor deal would be renewed, according to AHDB analyst Olivia Bonser.

“Prices continue to fall further on news of further progress, with the Russian foreign minister stating the UN has informed him of written assurances from the EU and US to remove obstacles to Russian grain and fertiliser exports,” said Ms Bonser.

The AHDB reported that wheat markets were marginally bullish in the short term but fairly natural in the next two to six months, with the renewal of the deal key to price direction in the short and long term.

Multinational co-operative bank Rabobank outlined in its agri-commodities outlook 2023 that in a typical year Ukraine would represent 10% of global wheat exports.

Carlos Mera, head of agri-commodities markets research at Rabobank, said: “An extension of the grain deal will enable higher exports in the next few months, but we are still seeing a drop in the wheat area.”

Further shortages of labour, fertiliser and other inputs in Ukraine are expected to lead to lower yields and a lower area for wheat next year, according to Mr Mera.

Alternative routes

Speaking at the G20 summit in Bali, European Commission president Ursula von der Leyen said the deal needed to be extended.

Ms von der Leyen said: “In addition, in the EU we set up alternative transport routes to bring agri-food products out of Ukraine, which we call solidarity lanes. Since May, more than 15m tonnes have been exported through these routes and we are further increasing their capacity.”

Global outlook 2023

Rabobank expects a global deficit for wheat of about 6m tonnes for 2022-23, which will be the third consecutive deficit in a row.

The wheat area in Ukraine is expected to contract by 30% on 2022 levels, while Russian production is projected to return to more normal levels after a bumper crop this year.

Wheat plantings in the US are currently being affected by dry conditions due to the weather phenomenon known as La Nina.

Better crops are expected in 2023-24 in the EU, assuming relatively normal weather.

Crop conditions in South America have varied, with the weather in Brazil dry in recent weeks, but generally good.

Rabobank’s Carlos Mera said very dry weather in Argentina had compromised wheat yields and the wheat crop was very disappointing.

In contrast, rainfall in India and Australia had led to relatively good crops in those areas, he reported.

Demand in 2022-23 and 2023-24 will be limited by a recessionary scenario in major economies, according to the report.

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