Wheat prices fell by 2-3% after another increase in the harvest forecast in the Russian Federation

The global market remains under pressure from forecasts of an increase in wheat production in the Russian Federation, despite forecasts of a reduced harvest in the EU, as cheap Russian wheat will reduce demand and prices for much more expensive European wheat.

The IKAR agency raised the forecast for the wheat harvest in the Russian Federation to 99 million tons (76 million tons last year), and for exports to 47.5 million tons. If the forecast comes true, the world supply of wheat will exceed the USDA's September estimate by 7 million tons, and prices will continue to fall .

Russian wheat is already sold at a significant discount compared to European wheat, since many importers refuse it due to sanctions against the Russian Federation, however, as in the oil market, there are buyers of much cheaper grain, which ultimately reduces both demand and prices.

Yesterday, Saudi Arabia's state agency SAGO bought 556,000 tonnes of wheat with a protein content of 12.5% for delivery between November 10, 2022 and February 25, 2023 at an average price of $371.61/t C&F, while the August purchase price was $441.9 $/t C&F.

Wheat quotations started the new week with a fall:

• by 3.6% or $10.75/t to $305.2/t - December futures for soft winter SRW wheat in Chicago (-3.3% for the week),
• by 2.9% or $9.28/t to $334.3/t - December HRW hard winter wheat futures in Kansas City (-1.9%).
• by 2.3% or $7.53/t to $337.4/t - December futures for HRS durum wheat in Minneapolis (-0.9%).
• by 0.8% or $2.75/t to $312.5/t - October Black Sea wheat futures in Chicago (-0.8%).
• by 2.5% or €8/t to €325.75/t or $326.68/t - December wheat futures on Paris Euronext (-3%).

Prices for American wheat were not supported even by the growth of weekly export shipments from 757 to 790 thousand tons. While the total export of the season as of September 15 of 7.211 million tons is significantly inferior to last year's 7.751 million tons. The market is pressured by the high pace of harvesting spring wheat in the United States, which threshed on 94% of the area, and favorable weather for harvesting in Canada, which increases the volume of offers.

According to Reuters, due to the drought, the grain harvest in Morocco in 2022 will decrease by 67% to 3.4 million tons, in particular wheat - to 1.89 million tons, due to which imports will increase to 4.5-5 million tons compared to 3 million tons on average over the last 10 years. France exported more than 1 million tons of soft wheat to Morocco in the summer, and can deliver up to 2.5 million tons of grain there by the end of the year.

In Ukraine, export prices for wheat in ports rose to $205-210/t or UAH 8,000-8,200/t, after which processors raised prices for wheat of class 2.3 to UAH 6,000-6,500/t with delivery to the mill. However, due to poor sales, the flour margin for wheat processing is very low.

Currently, export prices for wheat in Ukraine are waiting to see how the situation with grain corridors will develop after November 1, so any news on this matter can significantly change the market.