Why are global wheat prices sliding? Grain market daily

• UK futures slipped again yesterday. The Nov-22 contract closed the day at £292.70/t, down £1.65/t from the day earlier. Both May-23 and Nov-23 futures fell also, ending yesterday’s session at £298.50/t and £257.00/t, back £1.85/t and £2.40/t respectively.
• Chinese soyameal inventories have tripled in the last three months. Weakening domestic demand, while large shipments have still been arriving, have led to inventories rising by 14% to 1.09Mt as at the end of last week.
• Paris rapeseed prices continued tumbling for a third day yesterday. The Nov-22 contract was down €27.25/t on the day, ending Wednesday at €691.25/t. This is the first time since 4 March that this contract has dropped below €700.00/t.

Global grain prices backed off again yesterday, with tightness concerns easing a touch from certain key exporters. So, what is behind this?

Harvest pressure

Yesterday, Ant outlined the harvest pressure being felt on global wheat values. The US winter wheat harvest is commencing at pace. The latest crop progress report from the USDA pegged harvest at 25% complete, the fastest starting rate since 2018. The dry, warm weather, that has stymied yield potential of the crop has assisted this strong start. The EU harvest has also begun, again the start early due to the dry weather.

US exports

US exports have showed lacklustre demand over recent weeks. The strong US dollar, following a series of rate hikes in the US, is keeping buyers more cautionary. This may mean we see an upwards revision to US end of season wheat stocks for 2021/22, which had already been increased in the last quarterly stocks report. The next report is due to be released on 30 June.

Fertiliser availability

News came out this week from a US official stating that food and fuel exports from Russia were not subject to sanctions. Reportedly, the government is trying to quietly encourage purchases of more Russian fertiliser to cool prices. This further eased supply concerns and therefore eased prices.

Recession concerns

A series of key economic announcements on both sides of the pond, is keeping recession concerns bubbling away. The US Federal Reserve Chair, Jerome Powell, said earlier in the week that the possibility of a US recession remains on the table. Meanwhile, the rate of inflation in the UK peaked at 9.1% in May, rising at the fastest rate for 40 years. These global growth risks are keeping a lid of prices at the moment, despite a tight supply outlook.

Ukrainian grain corridors likely?

A delegation from Turkey is travelling to Moscow this week to try and further negotiations with Russia to allow the release of some Ukrainian grain from the country. The plan envisages creating three corridors out of Odessa, which would allow both Ukrainian and Russian food products to be shipped. This could amount to some 30-35Mt of grain over the next six to eight months. However, any final agreement would be subject to all parties (Turkey, Ukraine, Russia and the UN) coming together. A meeting to progress this is scheduled for Istanbul in the coming weeks.

What’s the outlook?

With all these factors in play, price volatility looks set to remain on the cards. The war in Ukraine is providing the floor for the market, but if Northern Hemisphere harvest continues this pace and demand remains subdued, we may well see any significant price increases capped.

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