Activation of exports from Black Sea ports supports wheat prices in Ukraine, but lowers stock exchange quotations

Russian shelling of Ukraine's energy infrastructure last week shut down the ports of Great Odesa, but 24/7 energy companies restored power earlier this week, and the ports of Odesa, Chornomorsk, and Yuzhnoye resumed shipping. On December 13 and 14, 12 vessels with grain came out of them, which added optimism to traders and led to a slight decrease in stock exchange quotations.

Against the background of increased demand from traders, purchase prices for wheat in the ports of Ukraine rose by $3-5/t to $210-220/t for food wheat and $190-200/t for fodder wheat. Farmers hold back wheat sales because they are busy harvesting and drying corn, and sell soybeans or sunflowers to replenish working capital.

In 2022/23, Ukraine exported 7.25 million tons of wheat (15 million tons last year), including 482,000 tons (364,000 tons last year) from December 1-14. In order to reach the predicted USDA 12.5 million tons, it is necessary to export 800,000 tons every month. Due to the rains during the harvest, the quality of wheat is much worse this year, so the premium for food grain may soon increase from $10-15/t to $20-25/t .

According to the European Commission, during the week of December 5-11, EU countries almost halved wheat exports to 242.8 thousand tons due to a drop in demand from importers, and in general, since the beginning of the season, exported 15.38 million tons of wheat (in particular, France - 6.5 million t), which is 6% higher than last year's rates. If importers do not intensify purchases, it is unlikely to reach the projected 36 million tons. The main buyers remain Morocco (13.7% or 2.1 million tons), Algeria (13.4% or 2 million tons), Egypt (1.6 million tons), Nigeria (1.1 million tons), Saudi Arabia ( 851 thousand tons).

A record wheat crop in Australia is adding pressure to prices in Southeast Asia. So, last week, Philippine importers purchased 119,000 tons of feed wheat, presumably Australian, at an international tender at a price of $330-335/ton C&F.

In the US Plains, 7-50 cm of snow fell, which allows us to hope for a decrease in drought conditions in the next season, so prices for spring wheat fell more than for soft wheat.

After the collapse of the quotations caused by the December USDA report, they gradually recovered this week, but yesterday, against the background of increased supplies from Ukraine, they decreased again:

• by 0.2% or $0.55/t to $273.8/t - March futures for soft winter SRW wheat in Chicago,
• by 1.8% or $5.51/t to $312.4/t - March HRW hard winter wheat futures in Kansas City,
• by 0.6% or $2.02/t to $337/t - March futures for HRS durum wheat in Minneapolis,
• by 0.4% or $1.25/t to $301.5/t - January futures for Black Sea wheat in Chicago,
• by 1% or €3/t to €302.5/t or $322/t - March wheat futures on Paris Euronext.

In India, stocks of wheat in state warehouses fell to a 6-year low of 19 million tons on December 1, while last year they were 37.85 million tons. In 2016, stocks decreased to 16.5 million tons after two consecutive years of crop failure. In 2022, the heat sharply reduced the yield of Indian wheat, while the demand for it increased due to the reduction in the supply of Black Sea wheat on the market due to the military aggression of the Russian Federation against Ukraine. In the current season, India will reduce wheat production to 103 million tons (109.6 million tons last year) and reduce its export.