Freezes and a decrease in the harvest forecast in the Russian Federation accelerate the rise in wheat prices, in particular in Ukraine

Speculative growth in wheat prices continues on world exchanges, which increased by 14.6-21% during the month against the background of frosts in the EU and the Russian Federation and the USDA's projected reduction in global stocks in 2024/25 MR.

Frosts up to -3...-8 ^o C slightly damaged spring wheat crops in the Voronezh and Kursk regions and became a speculative factor supporting prices, as did the recent frosts in the north of Europe, which damaged rapeseed crops, although there are still no data on losses.

Wheat quotations, which after the USDA report rose by 2-4% yesterday, rose in price by another 2.5-4% against the background of yesterday's forecast by the IKAR agency about a decrease in the wheat harvest in the Russian Federation from 91 to 86 million tons (88 million tons in the USDA report).

July futures for new harvest wheat rose yesterday:

• by 3.5% to $252.4/t – for soft winter SRW wheat in Chicago (+5.7% for the week, +21% for the month, $242.8/t a year ago),
• by 4% to $257.2/t - for HRW hard winter wheat in Kansas City (+3.7%, +20.7%, $330.1/t),
• by 2.5% to $271.3/t - HRS durum spring wheat in Minneapolis (+1.8%, +14.6%, $320.9/t),
• by 3.7% to €258.75/t or $279.1/t – September wheat futures on the Paris Euronext (+5.5%, +19.2%, €239.5/t).

We will remind that last year, based on the data of the report and against the background of the delay in sowing, wheat prices also rose sharply, but in the second half of the season they decreased due to low export rates and buyer demand.

According to NASS USDA data, in the USA during the period of May 6-12, the number of winter wheat crops in good or excellent condition remained at the level of 50% (29% last year), and 61% of the planned areas were sown with spring wheat (35% last year and 48% in average over 5 years).

The export of wheat for May 3-9 grew by 8% compared to the previous week to 339,000 tons, and in total in the season reached 17.65 million tons, which is 5.81% lower than last year's pace.

In 2023/24, Ukraine exported 16.41 million tons of wheat (which is 9.6% more than last year), in particular, for May 1-13 – 634 thousand tons (582 thousand tons for this period in 2023). In the May USDA report, the forecast for wheat exports from Ukraine was left at 17.5 million tons, and for the Russian Federation it was increased from 52 to 53.5 million tons against the background of active supplies. At the same time, for 2024/25 MR, the export forecast for Ukraine was reduced to 14 million tons, and for the Russian Federation - to 52 million tons.

Export demand prices in Ukraine, following world prices, rose in a week for fodder wheat by 500-600 UAH/t to 7800-7900 UAH/t or $175-178/t, and for food - by 400-500 UAH/t to 8300 -8500 UAH/t or $190-194/t with delivery to Black Sea ports. They are supported by a sharp increase in prices for European wheat, which reached $270-280/t with delivery to buyers, which is equivalent to $220-230/t FOB - Ukrainian Black Sea ports.

High export prices and forecasts of a reduced harvest keep the prices of new crop wheat at a high level, but it is worth considering the significant reserves in the Russian Federation and Kazakhstan, as well as the decrease in global demand.

Traders have not yet paid attention to forecasts of good harvests in importing countries (especially Russian wheat). Thus, Iran's Ministry of Food and Agriculture announced that it will not import wheat until March 2025, as its own harvest will reach 10.5 million tons (7.5 million tons in 2022/23 FY and 4.5 million tons in 2021/22 FY). In addition, the MSG of Iraq predicts that the wheat harvest in 2024 will exceed 7 million tons, while domestic demand is 4.5-5 million tons of wheat per year.