Global wheat market: U.S. wheat soars 40% to a 14-year high

 

On Friday, the Chicago Board of Trade (CBOT) May soft red winter wheat futures settled at about 1,209 cents per bush, up 349.
25 cents, or 40.
62%, from a week ago
.
May hard red winter wheat futures on the Kansas City Futures Exchange (KCBT) settled at around 1,214.
5 cents a bushel, up 323.
5 cents, or 36.
31%, from a week ago
.
May hard red spring wheat futures on the Minneapolis Grain Exchange (MGEX) settled at around 1,147 cents per bush, up 186.
75 cents, or 19.
45%, from a week ago
.
Euronext's May 2022 milling wheat futures traded at around €371.
75/tonne, up €82 or 28.
3% from a week earlier
.
The spot price of Argentine wheat was $418/ton, up $53 or 14.
5% from a week ago
.
The U.
S.
dollar index closed at 98.
51 on Friday, up 2 percent from a week earlier
.

 

　　Russia-Ukraine conflict exacerbates supply shortages, buyers panic buying, speculative funds fuel the flames

 

　　Ukrainian closures of Black Sea ports have disrupted exports following the outbreak of conflict between Russia and Ukraine on February 24, while Russian exports have also been severely disrupted by Western sanctions
.
The two countries together account for 29 percent of global wheat exports
.

 

　　Ukrainian ports will remain closed until the end of the military conflict with Russia, the head of Ukraine's maritime administration said on Monday
.
Many shipping lines have already suspended voyages to Black Sea ports
.
Black Sea shipping insurance premiums have soared as multiple merchant ships have been hit by artillery fire since February 24
.

 

　　In addition, although Russia's Black Sea ports remain open, a lack of ships willing to call at Russian ports and concerns about the impact of Western sanctions have led to a sharp drop in new sales of Russian wheat
.

 

　　In addition to the Black Sea shipping challenge, some of Russia's largest wheat exporters have ties to Russia's state bank VTB Group, which is currently under financial sanctions from the United States , meaning payment for the goods will be difficult
.

 

　　Scott Owen, an agricultural economist at the University of Illinois, said it was the largest supply shock to the global grain market he had seen in his lifetime
.

 

　　Black Sea Crisis May Affect Spring 2022 Sowing

 

　　At the same time, there are concerns about the prospects for spring planting in the Black Sea region
.
As spring planting approaches, the Black Sea crisis could prevent farmers in Russia and Ukraine from planting crops as they could be caught up in fighting and lack of supplies of seeds and fertilizers
.
More than 95% of Ukraine's wheat is winter wheat, and most of the wheat is in good condition, but due to high nitrogen and natural gas costs, combined with dry weather, winter wheat acreage is significantly smaller than initially expected
.

 

　　Russia's winter crop accounts for about 70% of the total production, which means that 30% has yet to be planted
.
Russian spring wheat is planted in Siberia, the Urals and the Volga regions, with planting concentrated in May and continuing into June
.
Spring wheat yields are much lower than winter wheat, and yields are more volatile
.
Russian farmers are also facing difficulties in agricultural financing due to Western sanctions, which means that the Russian-Ukrainian crisis will have a longer-term impact on the wheat market than the current supply disruption
.
Russia's Ministry of Trade and Industry announced on Friday that the government will not allow fertilizer producers to export their products
.
This could severely constrain the already tight global fertilizer supply
.

 

　　Inventories in major global wheat exporters at 9-year low

 

　　Global wheat supplies were already tight long before the Russian-Ukrainian conflict and subsequent sanctions disrupted Black Sea wheat supplies, as dry weather in the U.
S.
and Canada and a rainy European harvest last year reduced supplies from major global exporters and boosted prices.
go higher
.
Wheat ending stocks at the end of the 2021/22 season are forecast at 57 million tonnes in the world's leading wheat exporters, the European Union, Russia, the United States, Canada, Ukraine, Argentina, Australia and Kazakhstan, according to the International Grains Council (IGC).
hit a nine-year low
.
Global wheat consumption totaled 781 million tonnes, meaning exporting countries' inventories could only support global consumption for 27 days
.
If Russia and Ukraine are excluded, the stocks of other exporters account for only 16% of global stocks, which is enough for world demand in less than three weeks
.

 

　　Up to 60% of the United States is in drought, and the wheat belt is especially worrying

 

　　In the United States, drought conditions in the wheat belt continue to worsen
.
Sixty percent of the continental U.
S.
is in drought this week, up 2 percentage points from a week ago
.
It is now comparable to the drought of 2012, when the U.
S.
drought coverage reached an all-time peak of 65.
5% in September 2012
.
Drought in the wheat belt is by far the biggest concern, said USDA meteorologist Brad Lippi
.

 

　　On February 27, the USDA reported that Kansas had an 80 percent deficit to severe deficit in topsoil moisture, and 38 percent of the state's winter wheat was rated as poor
.
Severe drought (D2) expanded in Kansas and Nebraska due in part to short-term precipitation deficits, as did other drought categories
.

 

　　EU plans to boost wheat production

 

　　In response to the heightened risk of disruptions to global wheat supplies, French agricultural group InVivo on Wednesday recommended that the European Union allow farmers to cultivate fallow fields and provide fertilizer subsidies to make up for millions of tonnes of Ukrainian wheat supplies lost due to the crisis
.
EU wheat prices have hit all-time highs as the Russian-Ukrainian military conflict that erupted less than a week ago disrupted exports of wheat from European granaries, exacerbating an already tight global wheat supply and demand situation
.
The ongoing conflict will have a lasting impact on Ukraine's grain supplies, with its wheat production likely to at least halve, reducing world wheat supplies by 20 million tonnes, InVivo Chief Executive Tilri Brandonier said on Wednesday
.
In this case, the EU should be based on unlocking its own production potential
.

 

　　Indian wheat exports may pick up pace

 

　　International buyers also began to inquire about Indian wheat this week, indicating that the pace of Indian wheat exports is expected to accelerate
.
After five consecutive years of bumper harvests, India was already struggling with huge wheat inventories
.
Now both the Indian government and the private sector are looking to seize the current opportunity in an effort to sell wheat to overseas markets
.
Nitin Gupta, vice president of Singapore's Oran International Agricultural Company, said that the Black Sea has been the world's largest supplier of wheat, but given the current uncertainty (Black Sea supply), wheat demand will turn to India
.
Until April and May this year, the global supply of wheat is still limited, and India can easily seize this opportunity
.
India's wheat exports in 2021 will be 6.
12 million tonnes, up from 1.
12 million tonnes in 2020
.

 

　　Australian wheat production expected to hit record 36.
3 million tonnes

 

　　The Australian Bureau of Agricultural Resources Economics and Sciences (ABARES) released its quarterly report this week predicting a record 36.
3 million tonnes of Australian wheat production in 2021/22, 5.
5% higher than forecast three months ago, which should help ease the Global supply shortages caused by drought and the conflict in the Black Sea
.
Some private sector forecasts are even higher, with Icon Commodities forecasting 39 million tonnes of Australian wheat
.
Despite a higher forecast for wheat production, the ABARE report points to a decline in wheat quality as quality fell broadly in November in Queensland and NSW with their highest rainfall in more than 100 years, with a record feed wheat production in NSW level
.

 

　　Winter wheat conditions in China could be worst year on record

 

　　Starting Friday, China will hold two sessions
.
China's Agriculture Minister Tang Renjian said on Saturday (March 5) that this year's winter wheat crop conditions may be the worst in history
.
Rarely heavy rainfall last autumn delayed the planting of winter wheat on 7.
33 million hectares, or a third of the total area
.
Still, China will try to achieve a bumper crop this year
.
At present, the area of ​​winter wheat is 22 million hectares, which is basically the same as the previous year.
The soil moisture content is good, and the first and second types of seedlings have increased
.
China has also stepped up policy support, raised the minimum purchase price of rice and wheat, and achieved full cost insurance and planting income insurance for the three major grain crops.
Increase support for major producing areas
.

 

　　Department of Agriculture supply and demand report next Wednesday

 

　　On Wednesday (March 9), the U.
S.
Department of Agriculture will release a supply and demand report
.
Given the uncertain situation in the Black Sea, it may be difficult for the USDA to adjust the global wheat balance sheet, and may maintain its forecast for U.
S.
wheat exports unchanged at 628 million bushels, and global wheat ending stocks may also remain at 278 million tons
.

 

　　Investment bank expects wheat prices to reach as high as $14.
5/bushel

 

　　Citigroup strategists expect Chicago wheat futures to rise to $14 to $14.
50 in an "extreme bull case" scenario, implying a doubling of prices from late last year
.
Citigroup analyst Aakash Doshi said the Russian-Ukrainian conflict could undermine the outlook for the agricultural market
.
Without a quick and sustained moderation, the shock will be reflected in crop prices through a variety of channels
.

 

　　If the Russian-Ukrainian conflict remains unresolved or worsens, higher wheat prices could show up around June, as the real tightening is four months away, said Michael Whitehead, head of agricultural analysis at ANZ
.
If Russian and Ukrainian wheat were kept out of world markets (which seems to be the case), prices would really rise at this point
.