The problems with the export of grain from Ukraine caused a significant increase in grain prices. The developments in the Black Sea region are of course attracting attention, but problems are also looming for the wheat harvest of 2023. Few encouraging figures were released on this from both Ukraine and the US.
Wheat prices on international stock exchanges rose sharply in the last trading session. On the Matif, the December wheat contract rose by €14,75 to close at €352,50 per tonne. In America, the price on the CBoT rose by 6,4% to 8.82,25 per bushel (approximately €329 per tonne). Corn recorded a plus of 1,6% on the CBoT and soy became 1,4% more expensive.
The Russian decision to unilaterally withdraw from the grain deal with Ukraine has played a major role in rising grain prices. Yesterday (Monday, October 31), twelve ships loaded with grain left Ukraine. That will provide some relief to the market in the short term. Shipping insurer Ascot announced yesterday that no new insurance policies will be taken out for ships wanting to go to Ukraine for the time being. The insurance policies already taken out remain valid. Ascot has been by far the most important insurer of ships sailing under the grain deal in recent months. The insurer does not want to insure ships again until it is clear what consequences the Russian decision will have for shipping in the Black Sea.
The UN and Turkey are trying to revive the grain deal. Whether this will succeed is doubted by several experts. One possibility, for example, would be to call on NATO for help. Navy ships in the NATO fleet could then guarantee a safe corridor. A direct confrontation between NATO and Russia has so far been avoided at all costs. It is therefore not expected that this strategy will now be deviated from. Putin has had difficulty exporting Russian grain in recent months, while Ukraine has benefited from the deal. It is also considered unlikely that the Kremin will simply move to resume the grain deal. The export of grain from Ukraine by land via the EU is the most realistic option for the time being. However, capacity is limited on these routes.
Too wet and too dry
In addition to the problems in Ukraine with the export of grain from the 2022 harvest, the growing season for the 2023 harvest is off to a difficult start. The Ukrainian Ministry of Agriculture expects a winter wheat area of 3,5 million hectares. Due to unfavorable weather, only 1% of these have been sown until November 87. A year ago, the Ukrainian area of winter wheat sown until this date was 6,1 million hectares. Of course, this includes a large area that is now occupied by the Russians. Winter grains and rapeseed sown late and under suboptimal conditions are extra sensitive to unfavorable winter weather, the Ukrainian meteorological service warns.
Yesterday the USDA released its weekly Crop Progress report. The US corn harvest is 76% complete. The five-year average stands at 64%. The soy harvest is also ahead with 88% harvested compared to 78% in the five-year average. The American figures are less favorable for winter wheat. At 87% complete, sowing is narrowly ahead of the five-year average of 85% for this period. In contrast, emergence is lagging behind with 62% of wheat at the top versus 66% in the five-year average. The wheat condition is disappointing, with only 28% of the area receiving the excellent or good status. Last year, 45% received excellent or good status at this stage of the growing season. Drought continues to affect key wheat growing areas in the US.