Grain prices rose again this week, especially wheat and corn that are close to their historical maximums, in the midst of the war in Ukraine and with the prospect of a fall in world wheat reserves.
Prices are “at levels close to the maximum recorded. The situation in Ukraine is not improving, and this becomes more important as we approach crucial periods for spring plantings,” warned Gautier le Molgat, an analyst at Agritel.
Before the war, Ukraine, a country that was known as “the breadbasket of Europe”, exported 12% of the wheat, 15% of the corn and 50% of the sunflower oil Worldwide.
But “the continuation of the conflict delays Ukraine’s ability to return to the market and the time when the ports will be able to export again,” warns Edward de Saint-Denis, a broker at Plantureux and Associates.
The export capacity of Ukraine was reduced to 10% of its potential, and only by routes and trains. Neighboring Black Sea ports in Bulgaria and Romania are overcrowded.
Tribute to a Ukrainian soldier killed in the war. Reuters Photo
problems in ukraine
“It is clear that they planted wheat, but will they be able to harvest it and then export it? That’s the question” the market is asking and driving prices higher, said Jason Roose of US Commodities.
Even the conditions for planting are difficult, according to Edward de Saint-Denis: “What we see with our customers on site, is a big problem due to (lack of) fuel for the agricultural machinery”.
“The market continues to accumulate risk premiums every day: inflation premium, war premium, climate premium,” sums up Jason Roose of US Commodities.
“The agricultural sector captures the attention of the whole world”he added.
cereal prices are also driven by oil. The rise in crude oil entails a rise in oilseeds, used in the production of diesel, such as rapeseed or soybeans, and in corn-based ethanol in the United States.
Precisely on US soil, the state of wheat crops is mediocre and corn plantings are starting slowly, according to a report from the Department of Agriculture (USDA).
The cold and humid weather in the central west of the country, dry in the great plains of the south, “not ideal for starting crops”which also supports prices, Roose said.
Chinese shopping
Corn, whose price in Chicago is at a high in more than 10 years, also benefited from huge purchases from China in recent weeks.
“China was a very important buyer of American corn in the last two weeks, because it needs animal feed, and Ukraine can’t provide it,” said Jack Scoville of Price Futures Group. China bought two shipments of one million tons each.
US Commodities’ Roose wonders if Beijing “will have the buying power to buy more (grain) at prices at this level.”
Meanwhile, the rise in soybean prices, also close to record highs, wobbled a bit in recent days on “concerns about Chinese demandbecause of the COVID lockdowns there,” Scoville said.
“China was not mentioned (for soybeans) in the USDA’s daily sales reports in the last two weeks,” the analyst added, adding that the available supply of the oilseed for export from South America is limited.
“In general, operators are tense, and the industry is forced to face runaway inflation in raw materials and in their production costs,” said Edward de Saint-Denis, of Plantureux and Associates.
Source: AFP
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