Wheat Futures Lowest Since September 2021, “Optimism” on Renewal of Black Sea Grain Deal

Bloomberg writer Tatiana Freitas reported yesterday that, “Wheat futures declined to the lowest in 17 months amid ample near-term supplies.

The most active contract fell 1.6% to settle at $7.10 a bushel, the lowest since September 2021. The grain heads for a decline of 6% this month, the biggest monthly loss since November.

“Top-shipper Russia is expected to post record-high exports in the second half of the season, while Ukraine is seeking to extend its Black Sea grain-export deal by one year.”

Freitas explained that, “Strong regional supplies are making sales more competitive, weighing on futures as traders expect the safe-corridor deal to be extended, according to Terry Reilly, senior commodities analyst at Futures International LLC. The Black Sea corridor deal ends in mid-March and negotiations for its renewal already have started.”

Dow Jones writer Kirk Maltais reported yesterday that, “While much of grain traders’ focus is on the upcoming renegotiation of the Black Sea Grain Initiative, a winter storm that crossed through the Midwest over the weekend also pressured wheat futures Monday.

“‘Several large snowfalls in the Upper Midwest, Great Lakes region (and California), may prove to be well-timed, given the potential to alleviate drought conditions as spring planting season approaches,’ said Ken Zuckerberg of CoBank in a note.”

The Dow Jones article noted that, “The Black Sea Grain Initiative deal is due to expire March 19, but with increased aggression by Russia against Ukraine in the wake of the conflict’s one-year anniversary, some traders are concerned that a nixed deal will strangle the flow of wheat from the region.

“Still, Russian wheat exports have been aggressively priced, and many traders believe that Russia’s behavior doesn’t preclude the deal being renewed again.”

Also yesterday, Reuters writer Mark Weinraub reported that, “Chicago Board of Trade wheat futures dropped 1.6% to their lowest level since September 2021 on Monday as rain across key growing areas during the weekend boosted harvest prospects for the U.S. crop, traders said.

“Optimism that the deal allowing grain shipments from Black Sea ports in war-torn Ukraine will be renewed in the coming weeks pressured both corn and wheat. The agreement has increased competition for suppliers of wheat and corn and expires in March.”

Meanwhile, Reuters writer Pavel Polityuk reported yesterday that, “Ukraine grain exports are down almost 27% at 31.8 million tonnes in the 2022/23 season so far, hit by a smaller harvest and logistical difficulties caused by the Russian invasion, agriculture ministry data showed on Monday.

“The volume so far in the July to June season included about 11.2 million tonnes of wheat, 18 million tonnes of corn and about 2 million tonnes of barley. Exports at the same stage of the previous season were almost 43.5 million tonnes.

“The ministry said grain exports so far in February had reached 4.7 million tonnes as of Feb. 27, down from 5.04 million tonnes in the same period last year.”

Separately, Reuters writer Pavel Polityuk reported yesterday that, “Ukraine’s winter grain crops have made it through the 2022/23 cold season safely, state weather forecasters said on Monday.

“Most of Ukraine is a so-called risky planting zone, where the harvest can be affected by deep frosts in winter, drought in spring and intense heat in summer.

“‘Overwintering of winter crops was completed under safe conditions,’ consultancy APK-Inform quoted forecasters as saying.”

And today, Reuters writer Pavel Polityuk reported that, “Farmers of Ukraine’s southern Odesa region have started the 2023 spring sowing, taking advantage of favourable weather, local agriculture officials said on Tuesday.”

The Reuters article added that, “Ukrainian agriculture ministry has said it hopes that the 2023 spring grain sowing area could be at least at the last year’s level despite the Russian invasion and occupation of a part of the country.

“Last year, Ukrainian farmers sowed around 190,000 hectares of spring wheat, around 1 million hectares of spring barley and about 4.2 million hectares of corn and other commodities.

“The grain harvest declined to about 54 million tonnes in 2022 compared to a record 86 million tonnes in 2021.”