Global wheat market: U.S. wheat prices are higher after a record low in the rate of U.S. wheat

 

The Chicago Board of Trade (CBOT) December soft red winter wheat futures closed at about $8.
4775 a bushel on Friday, up 2.
2 percent
from a week ago.
The Kansas City Futures Exchange (KCBT) December hard red winter wheat futures closed at about $9.
5325/bu, up 3.
1 percent
from a week ago.
The Minneapolis Grain Exchange (MGEX) December hard red spring wheat season closed at about $9.
545 a bushel, up 1 percent
from a week ago.
Euronext's December 2022 futures closed at around 339.
25 euros/mt, up 0.
5% from a week ago; Argentine wheat spot was quoted at $413/mt, down 1.
7 percent
from a week ago.
The ICE dollar index closed at 110.
774 points on Friday, up 0.
15%
from a week ago.

 

The crux of the Black Sea agreement is that Russia did not benefit from it

 

Over the past week, the prospect of a Black Sea agreement has sent waves through the global wheat market
.
On October 29, Russia abruptly announced the suspension of its participation in an agreement to ensure Ukraine's safe export of grain through the Black Sea, citing Ukraine's massive drone attack
on its Black Sea fleet.
The development triggered a surge of nearly 8 percent in Chicago wheat on Monday as Ukraine is the world's leading exporter of
wheat and corn.
Just four days later, however, Russia announced its resumption of participation in the agreement after Ukraine submitted written assurances
that it would not conduct military operations against Russia through sea corridors and related ports.
However, Russia has not yet decided whether to extend the agreement
, which expires on November 19.
Looking back at the four-sided agreement brokered by the United Nations and Turkey at the end of July, Turkey has become an export hub of the Black Sea, and Europe has received a large amount of Ukrainian grain, which has helped to reduce the price of cereal sharply and reduce food inflationary pressures; But Russia can say that nothing has been achieved, because the core of the original agreement was the United Nations to facilitate Russian fertilizer and grain exports, but for several months there was no progress
on this front.
Western lip service assurances that it would not put obstacles in the way of Russian grain and fertilizer exports, but Western banks, insurance companies, and shippers have been reluctant to do business with Russia for fear of potential sanctions and reputational risk (the so-called chilling effect), which has limited
Russian exports.
Therefore, Russia's proposal to renew the Black Sea agreement is premised on the relaxation of sanctions on Russian grain and fertilizer exports, and one of the specific demands is to exempt the Agricultural Bank of Russia, which is responsible for the settlement
of export payments for Russian grain and fertilizers.
So the chances of a renewal of the Black Sea agreement depend on whether the West responds to expectations in terms of easing sanctions against the Agricultural Bank of Russia
.

 

Weather risks emerged, with U.
S.
winter wheat ratings hitting an all-time low

 

The USDA's first-ever 2022/23 Winter Wheat Rating Report showed that winter wheat had a good yield of 28% as of Oct.
30, well below the 45% in the same period last year and the lowest level since records began in 1987, highlighting the impact of the ongoing drought in the Great Plains of
the United States.
The U.
S.
winter wheat planting progress is 87%, with a five-year average of 85%.

The emergence rate of winter wheat is 62%, the five-year average is 66%.

About three-quarters of the U.
S.
winter wheat-producing areas are currently in drought, up from 43 percent
in the same period last year.
More than half of the winter wheat-producing areas are in severe drought or worse
.
Kansas, the top winter wheat-producing region, remained dry in the week ending Nov.
1, and parts of its southwest experienced the driest conditions ever recorded in October, widening
extreme and ultra-drought areas this week, according to U.
S.
drought monitors.
About 37.
6 percent of Kansas was in a hyper-drought state (D4) as of Nov.
1, up from 33 percent a week ago, when it was the highest D4 level since February 2013 and the highest D4 ratio
of any U.
S.
state, the report said.
About 59.
2% of the area is in extreme drought (D3), up from 58.
3%
a week ago.
In Oklahoma, about 21.
1 percent of the area is in super drought, unchanged
from last week.
About 66.
8 percent of the area is in extreme drought, down slightly from 70.
3 percent
a week ago.

 

U.
S.
wheat exports remain lagging behind

 

U.
S.
net wheat sales in 2022/23 were 35 mt in the week ended Oct.
27, down from 530,000 mt a week ago,
the USDA's weekly export sales report showed.
Year-to-date U.
S.
wheat export sales totaled 12.
17 million mt, down 6.
4 percent
year-on-year.

 

Australian wheat quality was damaged by flooding

 

Excessive rainfall in some wheat-growing areas of Australia and flooding in some areas have caused extensive damage
to wheat crops.
Analysts say that while Australian wheat is still on track for a third consecutive bumper harvest, about half of the wheat crop in the eastern cereal belt, known for its abundance of high-quality hard wheat, may only be used as fodder
.
However, the extent of
the damage will not be known until after the floodwaters have receded.
The Australian Bureau of Agricultural Resources Economics and Sciences (ABARES) warned in early September that La Niña would occur for the third consecutive year at the end of 2022, potentially leading to localized flooding and a quality decline
in wheat crops similar to those seen in 2021/22.
ABARES forecasts 2022/23 Australian wheat production of 32.
2 million tonnes, down 11%
from the previous year.

 

Argentina's wheat production has been reduced, and the government is considering allowing exports to be delayed

 

This week's Buenos Aires grain deal lowered Argentina's wheat production in 2022/23 to 14 million mt, down from last week's forecast of 15.
2 million mt
.
A week ago, the Rosario Grain Exchange forecast Argentina's wheat production at 13.
7 million tons, down about
four percent from 23 million tons a year ago.

 

Argentina's agriculture ministry said this week it would allow Argentine exporters who export wheat between Dec.
1 and Feb.
28 to delay shipments by up to 360 days
.
This means that global wheat supplies are likely to become tighter
.
The government's move is aimed at securing domestic supplies and helping exporters complete sales to global customers, as drought has severely reduced wheat production
.

 

Argentine government data shows that exporters have registered 8.
85 million tons of wheat for export, but farmers have priced in only 3.
15 million tons
of sales.
Domestic flour mills in Argentina have a demand for wheat of 6 million tons
.

 

In August and September, China was the number one buyer of Canadian wheat

 

Statistics Canada's trade data shows that China was the main destination for
Canadian wheat in the first two months of 2022/23 (August to July).
Canada exported 534,000 mt of wheat to China in August and September, about double the same period a year earlier, accounting for about 20 per cent of Canada's total wheat exports, with other major buyers including Japan, Bangladesh and the United States
.
China mainly imports Canadian hard red spring wheat (CWRS).

China also imported 125,000 tonnes of canola from Canada, accounting for 34% of Canada's total exports, slightly lower than a year earlier
.