The loss on the wheat market will be limited to a few euros loss for the September contract on Monday, August 1. Russia, meanwhile, is heading for a record high wheat harvest. Even with this volume, the wheat market remains firmly priced this season.
On Monday afternoon, the September contract for wheat on the Matif is trading around €5 lower than the close of €343 per tonne on Friday. Media worldwide report the first ship to enter Odessa port since the Russian invasion leave. It is mainly a glimmer of hope that the country will regain its vital export artery, although that is still a long way off. Just this weekend, Russian missiles struck the port city of Mykolaiv, about a two-hour drive from Odessa.
Export is still far from being at the same level
There are more reasons why this moment is especially symbolic. It is estimated that around 20 million tonnes of grains and oilseeds are still in the country. The current harvest is added to this. In July, the country exported 1,4 million tons of grain, according to government figures. That is 43% less than last season. Of this volume, 325.000 tons were wheat and 941.000 tons were corn. In the most positive case, exports could increase to 4 to 4,5 million tons per month. This means it will take months before enough grain is used up. The USDA expects total wheat exports of 10 million tons in the next twelve months, compared to 18,8 million tons in the previous twelve months.
The regular shelling of port cities along the Black Sea gives grain exporters, stock traders and analysts little hope that the Russians are really serious. Sailing to and from Ukraine remains dangerous. Shipowners are not eager and demand a considerably higher insurance premium for their ships and crew than is usual. These costs are in addition to the exported product.
Price still considerably higher
Wheat prices in Europe are still above the level before the war in Ukraine, when they were also rising. The difference is still around €60 to €70 per tonne. In the United States, the price of wheat is returning to pre-war levels at around $8 per bushel. Markets on both sides of the ocean have reached a bottom. In Europe it is still firmly at €325. The harvest of wheat in the EU is progressing very quickly and it is becoming increasingly clear that yields are not that good in many countries. That strengthens this soil.
Russia continues to show excellent yield figures and the total volume of wheat could end up at a record high of 90 million tons this year. The hectare yield is currently a quarter above last year. In July, the country exported an estimated 2,2 million tons of wheat, compared to an average of 2,6 million tons in July. In addition, Russian wheat is still relatively expensive on the world market. Europe is now doing good business, including with China and Pakistan.
Tightness on the global market remains
Even if Russia manages to export its large wheat harvest and Ukraine significantly increases the level, the grain market remains at an above-average level. The USDA expects the storage-to-use ratio to drop from 21,6% to 19,8%. Even with a significantly higher Russian harvest, with the USDA still maintaining a very conservative figure, there remains a great shortage on the world market. For the 2022-2023 season, this means that prices will remain above average, also for the longer term.