Wheat prices are recovering amid increased demand and lower crop forecasts

After falling during the past week to the lowest level since 2021, wheat quotations on world exchanges began to recover against the background of intensification of speculative demand and purchases by importers. They are also supported by the uncertainty with the harvest in the USA and Australia, where the production will be lower than last year, as well as the possible termination of the grain agreement due to the Russians blocking the passage of ships to the ports of Ukraine.

ABARES forecasts that Australia's 2023/24 wheat production will decrease by 34% compared to the previous season to 26.2 million tonnes due to reduced rainfall due to the El Niño phenomenon, although the USDA estimates the crop at 29 million tonnes (39 million t in 2022/23 MR).

Russian inspectors continue to block the operation of the grain corridor, so since May 31, no inspection of vessels has been carried out. Ukraine has published plan B for withdrawing from the grain agreement with the Russian Federation and continuing exports from Black Sea ports under state guarantees for shipowners.

According to Crop Progress from the USDA, as of June 5, 93% of the U.S. spring wheat acreage was planted, which corresponds to the 5-year average, and winter wheat was harvested on 4% of the acreage (5% last year and 4% on average). 64% of spring wheat crops are in good or excellent condition. The state of winter wheat crops was unchanged for the week - it slightly worsened in the states of Indiana, Michigan, Ohio and Washington, but improved in Kansas, Colorado, Oklahoma, Texas and North Carolina. The forecast of dry and hot weather for the next 2 weeks worsens the prospects for the spring wheat harvest.

Yesterday, July futures rose in price:

• by 0.8% to $229.3/t - for soft winter SRW wheat in Chicago (+5.6% for the week),
• by 1.2% to $302.1/t - for hard winter HRW wheat in Kansas City (+4.7%).
• by 1.5% to $301.4/t - for hard spring HRS-wheat in Minneapolis (+3.4%),
• by 2.9% to €230.5/t or $247/t – September wheat futures on the Paris Euronext (+2.1%).

July futures for Black Sea wheat in Chicago remained at $252.75/t.

Export prices for Ukrainian wheat with protein 11.5-12.5% for delivery to Danube ports in June fell to $170/t FOB, and supply remains low. During June 1-5, Ukraine exported only 52,000 tons of wheat, and in total in the season - 15.56 million tons (18.6 million tons last year).

On June 2, the State Food Safety Authority of Saudi Arabia (GFSA) held an international tender for the purchase of 480,000 tons of durum wheat for delivery in September-October, during which it purchased 624,000 tons of wheat with a protein content of 12.5% at an average price of $261.76/t C&F. The low purchase price may lead to lower prices in today's tender in Egypt.

European wheat is rising in price against the background of the extension of the ban on the export of wheat from Ukraine to 5 neighboring EU countries until September 15 and dry conditions in some European countries.

According to FranceAgriMer, 91% of soft wheat crops were in good or excellent condition in France on May 29 (93% a week ago, 67% - last year).