Crop reduction in the Russian Federation supports high starting prices for wheat in Ukraine

Weather conditions that are not too favorable for winter wheat in Ukraine and the Russian Federation will reduce the harvest and export potential for both countries. Therefore, at the beginning of the season, traders keep the purchase prices at a high level, trying to assess the volume and quality of the new crop.

Heat at 30-35 ^o C in Ukraine and the south-west of the Russian Federation will improve the quality of wheat, but reduce its yield. But if the temperatures drop in Ukraine from Wednesday, the heat will last until the end of the week in the Russian Federation. The first data on wheat harvesting in the Russian Federation indicate that the yield is 0.5-1 t/ha lower than last year.

The MARS agency predicts that in 2024/25 the Russian Federation will harvest 82.5 million tons of wheat (93.6 million tons last year), which will be 5% less than the 5-year average.

Purchase prices for wheat in Ukraine increased this week in Black Sea ports by $2-3/t to $192-195/t for food and $175-177/t for fodder wheat, while last year at this time they were $150- $160/ton.

The main reason for the increase in prices is the decrease in the cost of freight from the Black Sea ports of Ukraine to a level that corresponds to the price of freight from Romania and the Russian Federation, as well as a decrease in the cost of insurance for the risks of entering Ukrainian ports against the background of the active actions of the Armed Forces of the Russian Federation against the Black Sea Fleet of the Russian Federation, which has completely withdrawn from Crimea.

In 2023/24 MR Ukraine increased wheat exports compared to the previous season by 8.8% to 18.4 million tons (although the USDA estimated it at 17.5 million tons in June), but in 2024/25 MR will reduce it to 14- 15 million tons against the background of reduction of initial stocks and harvest to a 3-year minimum.

Active harvesting of winter wheat and improvement in the condition of spring wheat crops in the USA is putting pressure on stock quotes. According to NASS USDA data, winter wheat in the U.S. was 54% harvested as of June 30 (33% last year), and spring wheat in good or excellent condition rose 1% to 72% (48% last year). At the same time, starting prices for winter wheat in the USA are 13-35% lower than last year, and spring wheat prices are 28% lower than last year.

July wheat futures fell yesterday:

• by 1.4% to $206.3/t – for soft winter SRW wheat in Chicago ($233.8/t last year),
• by 1.7% to $217.9/t - for HRW hard winter wheat in Kansas City ($294.4/t),
• by 0% to $230.75/t - for hard spring HRS-wheat in Minneapolis ($294.7/t),
• by 1.4% to €227/t or $243.8/t – September wheat futures on the Paris Euronext (-14% for the month), which corresponds to last year's level.

Importing countries will increase wheat production in FY 2024/25, which will reduce demand for it at the beginning of the season. However, after the assessment of the harvest in the Black Sea countries, the demand for wheat will increase again. Iran has already announced that it will not export wheat this season. And Pakistan (according to FAS USDA estimates) will harvest a record 31.4 million tons of wheat this year, which will exceed last year's harvest by 11%.