Wheat prices are supported by forecasts of a reduced harvest next season

Strong export sales over the past few months have confirmed importers' fears that next season's wheat harvest in major exporting countries could shrink and wheat prices could rise sharply.

Agritel Grain experts estimate that the main seven wheat exporters have shown record shipments from October 2022 to January 2023 and that the world market will show record export sales by the end of the current season. At the beginning of February 2023, the main seven wheat exporters have about 55.5 million tons left for export in the second half of the season, which is 10 million tons more than last season. At the same time, about 46.5 million tons, or 84% of the remaining export potential, is accounted for by three countries: Russia (16.5 million tons), Australia (18 million tons) and Canada (12 million tons).

Currently, Ukraine, Argentina and the USA are exporting at lower rates (14.286 million tons, which is 1.5% lower than a year ago).

Russia, Canada and Australia significantly increased the pace of exports thanks to the increase in the harvest. EU countries are also ahead of last year's export due to increased demand from a number of countries on the African continent. On February 7, exports reached 19.05 million tons, which is 7% more than a year ago.

In the 2023/24 season, a sharp decline in wheat production in Ukraine is expected to the lowest level since 2007 - about 15-16 million tons, against 21 million tons in 2022 and 33 million tons in 2021, given the unsatisfactory conditions of autumn sowing.

A sharp reduction in the wheat harvest in the Russian Federation is also expected to 85-86 million tons from 100 million tons this season and 75.2 million tons in 2021, due to a decrease in the area of winter wheat and an increase in the loss of some crops due to frost.

In addition, in Australia, the wheat harvest forecast has been reduced to the level of about 25-26 million tons, against the record levels of 35-38 million tons in recent years.

Wheat production forecasts for the EU and the US are generally favorable, but the drought in the US Southwest continues and may further reduce yields in this region.

The market remains dependent on wheat supplies from the Russian Federation, which, although it claims that its exports are blocked, continues to actively ship wheat.

The pace of wheat exports from Russia remains high, 28 million tons have already been exported with a forecast export volume of 43-46 million tons. Wheat stocks in Russia (excluding farmers' stocks) as of January 1, 2023 remain at a record high level of 36 million tons, which is more than 1.6 times higher than last year's level and exceeds the previous record of 29 million tons in 2018.

Export prices for Russian wheat with a protein content of 12.5% for delivery in February continued to decrease and amounted to $298-300/t.

The Algerian State Food Procurement Agency (OAIC) bought about 450,000 tonnes of wheat at $329-$338 per tonne C&F for delivery in March-April, likely from Russia, Romania or Bulgaria.

On Monday, stock market quotations increased:

• by 0.7% or $2.2/t to $291/t – March futures for soft winter SRW wheat in Chicago (+4.6% for the week),
• by 0.4% or $1.19/t to $335.2/t – March HRW hard winter wheat futures in Kansas City (4.5%).
• by 0.1% or $0.18/t to $338.6,342/t – March futures for hard Yara HRS-wheat in Minneapolis (1%).
• by €1.75/t to €298.75/t or $320.7/t – March wheat futures on Paris Euronext (+5%).

March futures for Black Sea wheat in Chicago continued to decrease by $0.25/t to $304/t (0.2%).