The Russian-Ukrainian crisis brings wheat closer to record prices

The Russian-Ukrainian crisis brings wheat closer to record prices

The intensification of the conflict causes price hikes due to fears of logistics problems. With the best export performance for the month of January since 2008, the Argentine wheat harvest continues to supply domestic and foreign markets.

This Monday Russian President Vladimir Putin acknowledged the independence of the Republics of Lugansk and Donetsk. These regions are claimed as Ukrainian territory, which further exacerbated the conflict taking place in the Black Sea region. Meanwhile, in the early hours of Tuesday, Russian troops entered these territories.

With the commemoration of Presidents’ Day on Monday, and with Chicago market closed that day, all the increases were accumulated for Tuesday, Wednesday, and Thursday. Just on Tuesday, wheat rose almost 18 dollars in the North American market, 6%. This was the largest percentage jump for wheat futures in one day since July 2018. It also represented the largest relative growth in dollars since June 2012. On Wednesday, prices continued the upward path and rose more than 11 USD/MT, while on Thursday wheat grew again by more than 18 USD/MT.

The intensification of the conflict has led to the closure of Ukraine’s ports in the Sea of ​​Azov, although those in the Black Sea, the most important, remain operational. However, fears of interruptions in shipments of various agricultural commodities are heightened, as the Black Sea is where roughly one third of the global wheat is exported. At last reports, bombings were reported in port cities such as Mariupol and Odessa, as well as other major Ukrainian cities. In fact, towards the end of the day on Thursday, a missile hit a bulk carrier near the port of Odessa.

It is estimated that there is more than 3.8 Mil MT of wheat being shipped across the Black Sea, or the Sea of ​​Azov, at the moment. In fact, there are more than 576 ships loaded with agricultural products in the affected areas, which shows the relevance of the region in agro-industrial trade.

For this reason, wheat rose strongly during the week and is currently trading around 330 USD/MT, underpinned by the successive consequences and latent tensions caused by the military escalation in western Ukraine, although at the same time, limited by some profit-taking after these strong hikes. Piling up more than 13% for the week, we find wheat futures at highs that haven’t been seen in the last 10 years.

For their part, local prices were not unaffected by the Russian-Ukrainian conflict. Rosario’s wheat board prices jumped more than 3.5% on Tuesday, touching 250 USD/MT valued at the official exchange rate. This way, prices reached a level high unseen since May 2018. The available delivery reached 252 USD/MT on Wednesday, at the same time that the contract position touched 255 USD/MT. On Thursday March wheat was offered at 280 USD/MT.

In the first two months of the campaign, export wheat reach a 12-year highs

Last month revealed the best January exports since 2008. The total exports of the Argentine economy totaled USD 5.5 billion last January, just 3% above the forecasts published in the agro-industrial foreign trade estimates of the Rosario Stock Exchange.

From the viewpoint of export growth, wheat represented more than 15% of total exports last month, totaling shipments abroad for USD 868 million, 137% above January 2021.

If we add the data from the first two months of the campaign, we find the highest volume dispatched in 12 years. Not only this, but exports in US dollars also reached its highest levels in more than a decade, surpassing the USD 1.4 billion and almost tripling the values ​​of the same period last season.

Based on preliminary data on shipments, around 1.53 Mil MT have already been exported so far in February, and an additional 1.13 Mil MT are expected to be shipped before the end of the month, which would leave us with 2.67 Mil MT exported in the month. While waiting for the final data, with these preliminary estimates we’re facing the best February in recorded history.

Meanwhile, the Export Permits of milling wheat 2021/22 remains relatively stable at around 13.6 Mil MT for the week. Likewise, 2022/23 wheat exports continue unchanged at 1.8 Mil MT. Having completed 90% of the balance volume or preliminary export quota of 2 Mil MT, operations with shipments in the short term are not applicable to deferred sales of the new campaign. Meanwhile, in the domestic market the export sector has managed to secure the supply of 876,200 tons of wheat for the new campaign, below the sales agreed to date.

Wheat milling picking up, but still below previous campaigns

In the first two months of the 2021/22 campaign, wheat milling grew by more than 3.2% compared to the same period last season. However, the 0.91 Mil MT milled in the first two months of 2022 is below the last five years’ average of 0.94 Mil MT.

With this data, the growth of crushing for these two months continues to be in line with the forecasts for this item. With its estimate of total milling of 6.1 Mil MT in the 2021/22 business year, wheat processing expects to grow 4% this campaign compared to the previous one.

Source: https://bcr.com.ar/

Photo: REUTERS/Stringer

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