Black Sea Corridor putting downward pressure on grain prices

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 Competitively priced grain coming through the Black Sea corridor is putting pressure on global grain contracts,  AHDB is reporting.

Megan Hesketh, senior analyst Arable said, “Chicago wheat markets especially have been feeling pressure from a lack of competitiveness on global markets in recent months. Over November, Chicago wheat futures (May-23) have fallen 16% to 02 December. Demand and recession will also be key reasons for this fall in US price level, though Black Sea supplies continue to be a key pressuring factor.

“Black Sea wheat continues to be competitive on the global market. The Russian 2022 harvest forecast range is between 90-100m tonnes, depending on forecaster, resulting in large supplies available.

Black sea grain corridor

“With the establishment of the Black Sea grain corridor too, grains (particularly wheat and maize) continue to flow from Ukraine. Though November exports totalled 400K tonnes down from October (at 1.58m tonnes) according to the UGA Ukrainian grain traders’ union, down due to Russian delays in inspection of vessels.

“Whereas at the other end of the market, US wheat remains higher priced than EU and Black Sea supplies.

“Argentinian wheat price too remains at the top of the market, due to recent drought trimming yields. As at 2 December, Argentina Grade 2 (Up River) FOB price was $405/t.

As a result, we are seeing Russian wheat especially succeed in gaining global demand. Last week, 1Mt of Russian grain was reportedly exported according to Sovecon consultancy using port data (Refinitiv).

“As stated by European traders yesterday, a government agency in Pakistan is believed to have purchased 500K tonnes of wheat at $372/t CIF. This is optional origin, but traders expect to be substantially Russian origin. This is in addition to a deal announced yesterday by Pakistan to take 450K tonnes of Russian wheat in the new year.

“Last week, Turkey’s state board TMO provisionally purchased around 455K tonnes of wheat, with most expected to be sourced from Ukraine. Algerian state grains agency OAIC also purchased between 450-500K tonnes of milling wheat, expected to be sourced from countries including France, Germany, Bulgaria, and Russia.”

As a result, Black Sea wheat continues to be competitive, lending some pressure to global price contracts and impacting on UK prices. Though some challenges continue for Black Sea exporting, with rail cart availability in Russia limited and with long waits. For Ukraine, challenges surround delays in inspections for ships leaving as well as the ongoing conflict.

For other origins, EU demand continues keeping EU prices supported. With US wheat continuing to feel pressure too, we could see increased demand? This week, the USDA stated that US exporters prepared 334.7K tonnes of wheat to export in week ending 1 December, beating trade expectations (Refinitiv).

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