Global wheat market: wheat is mixed, weather concerns and the situation in the Black Sea is increasing volatility

 

The Chicago Board of Trade (CBOT) December soft red winter wheat closed at about $8.
5075 a bushel on Friday, down 1.
05%
from a week ago.
The Kansas City Futures Exchange (KCBT) hard red winter wheat for December closed at about $9.
4825/bu, down 0.
4 percent
from a week ago.
The Minneapolis Grain Exchange (MGEX) December hard red spring wheat season closed at about $9.
615/bu, up 0.
8 percent
from a week ago.
Euronext's December 2022 futures closed at around €342.
00/mt, down 2.
5% from a week ago; Argentine wheat spot quotes were $422/mt, up 0.
2 percent
from a week ago.

 

ICE's dollar index closed at 111.
98 points on Friday, down 1.
1 percent
from a week ago.

 

Global wheat production has been revised upward

 

Global wheat production in 2022/23 is forecast at 792 million mt, slightly higher than the previous month's forecast of 791.
9 million mt and up 1.
3 percent
from 781.
6 million mt, according to the International Grains Council's monthly report released Oct.
20.
The slight upward revision to this month's wheat production forecast is due to the fact that Russia and Australia have outpaced the decline in Argentina's wheat production
.
Russian wheat production is expected to be 95.
4 million mt, up from 93.
4 million mt
forecast last month.
Australian wheat production is expected at 33.
5 million mt, up from last month's forecast of 32.
2 million mt.

Argentina's wheat production was revised down to 17.
5 million mt from 18 million mt
.
Global wheat exports are expected at 192.
3 million mt, slightly lower than the 192.
8 million mt
forecast last month.
Global wheat ending stocks are forecast at 285.
8 million mt, slightly higher than last month's forecast of 285.
6 million mt but down 2.
8 percent
from the previous year.

 

Strategic Grains raises EU wheat production and export forecasts for 2022/23

 

French analyst firm Strategic Grains released its monthly report on Thursday, again raising its forecast for EU wheat production and also for wheat exports
.
Strategic Grains expects the EU soft wheat harvest to be 125.
5 million mt in 2022/23 (July-June), 1.
4 million mt higher than the 124.
1 million mt forecast in September, but still down from 129.
8 million mt
in the previous year.
The strong pace of exports at the start of the year and an upward revision to production led to raise the EU soft wheat export forecast for 2022/23 by 2.
3 million mt to 31.
1 million mt this month.

The EU is also importing wheat from Ukraine, so EU wheat stocks are expected to remain at very
comfortable levels, Strategic Grains said.

 

Drought in the American plains intensified

 

The USDA's weekly crop progress report shows that as of October 16, the U.
S.
winter small planting progress was 69%, compared with 69% in the same period last year and a five-year average of 68%.

The emergence rate of winter wheat was 38%, compared to 42% in the same period last year and a five-year average of 44%.

Recently, the winter wheat-producing regions of the United States have been unusually dry, which may threaten the initial growth of
the crop.
Kansas' surface mounds were short to very short at 88 percent, up from 81 percent last week; Oklahoma 96%, last week 95%; Texas 83%, last week 76%.

Weather forecasts show very limited rainfall in winter wheat producing areas over the next two weeks, which could prevent many newly planted wheat from seedlings
.
Friday's 72-hour precipitation forecast from the U.
S.
Oceanic and Atmospheric Administration (NOAA) showed a new round of rain in the U.
S.
plains from Oct.
23 to 25 (Saturday to Tuesday); From October 28 to November 3, there will be seasonal dry weather
in the plains of the United States.
The proportion of abnormally dry to arid areas (D0 to D4) in the U.
S.
plains wheat growing belt was 92.
19 percent in the week ended Oct.
18, up 1.
69 percent
from the previous week, according to the U.
S.
Drought Monitor data.

 

On October 20, the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center (CPC) released its 2022 winter weather outlook, showing that drought in the Great Plains of the United States will continue or worsen
between December and February.
Drought now covers 59 percent of
the United States.
This is because La Niña
appeared for the third year in a row.
NOAA predicts that drought conditions in the agricultural belts of the western and southern plains of the United States will persist or worsen, and that soil will be too dry to affect the planting of winter wheat crops
.
According to the National Center for Drought Resistance, nearly 90 percent of Kansas, the top wheat producer, is in some degree of drought, the worst drought
in at least eight years.

 

In its October supply and demand report, the USDA lowered 2022/23 U.
S.
wheat production to 1.
650 billion bushels, 133 million bushels lower than the previous month and the lowest since
2002.

 

U.
S.
wheat export sales fell more than 8 percent year-on-year

 

US net wheat sales in 2022/23 (June-May) were 163,100 mt in the week ended Oct.
13 and 22,000 mt in 2023/24, totalling 185,100 mt, down from 211,800 mt a week ago and below market expectations of 200,000 to 550,000 mt,
the USDA's weekly export sales report showed.
Year-to-date U.
S.
wheat export sales totalled 11.
29 million mt, down 8.
4%
year-on-year.

 

The USDA lowered U.
S.
wheat exports to 775 million bushels (21.
09 million mt) in its October supply and demand report, 50 million bushels lower than the previous month and the lowest since 1971/72, as U.
S.
wheat prices were high and uncompetitive
in export markets.

 

The outlook for the Black Sea export agreement is uncertain

 

Russia's U.
N.
ambassador to Geneva, Gennady Gatilov, said Thursday that talks on extending the agreement on the export of grain and fertilizers from the Black Sea had made little progress because Russia's concerns had not been properly taken into account
.
Last week Gatilov said Moscow had submitted its concerns about the Black Sea grain export agreement to the United Nations and was ready to refuse to extend it
.

 

On July 22, Russia and Ukraine signed parallel agreements
with the United Nations and Turkey in Istanbul.
Among them, Ukraine signed the Maritime Security Corridor mechanism to ensure Ukraine's export of grain from the Black Sea; The core of the Russian agreement is to facilitate
the export of Russian fertilizers and grain.
The agreement is valid for four months and expires
the following month.
Russia has complained about the failure to implement the terms of the agreement because Russian fertilizer and grain exports have been hampered
.
Gatilov reiterated Moscow's position on Thursday that Western sanctions are restricting Russian grain and fertilizer exports, even to poor countries that desperately need the products
.
However, despite pessimism expressed by Russian officials about the prospect of a renewal of the agreement, the media said Turkish President Recep Tayyip Erdogan saw no obstacles to
an extension of the agreement.

 

As of Oct.
10, 363 ships had transported nearly 8 million tons of agricultural products through the Black Sea Export Corridor, including 2.
4 million mt of wheat, of which 650,000 mt to Africa, or 26.
8 percent
of Ukraine's total wheat exports, Ukraine said.
In addition, a sixth vessel chartered by the United Nations is currently being loaded at the port of Chernomorsk and will deliver 40,000 tons of wheat to Yemen; Five vessels chartered by the United Nations have already delivered 150,000 tons of wheat
to Yemen, Afghanistan and Ethiopia.
Russia has accused Ukraine of exporting most of its grain through export corridors to rich European countries, rather than the poor countries
that need it most.

 

Russian wheat production is likely to decrease next year

 

Due to sluggish Russian wheat exports and low domestic prices this year, analysts expect farmers to reduce their wheat acreage
.
Moscow-based consultancy SovEcon expects Russian wheat production to fall to 84.
8 million mt in 2023, down 15.
7% year-on-year, as heavy rains in recent weeks could prompt farmers to drastically cut their winter cereal acreage; In addition, the strong ruble exchange rate and export tariffs have also led to relatively low domestic wheat prices
.
The company initially estimated the area of Russian winter cereal sown this autumn at 18.
8 million hectares, down from 19.
5 million hectares
last year.
Wheat usually accounts for 90%
of the winter cereal area.

 

Russian Agriculture Minister Dmitry Patushev said on Wednesday that the agriculture ministry had proposed to set a grain export quota of 25.
5 million tons
for next year.
The news had little impact on the wheat market, as the export quota of 25.
5 million tons was very high, and Andrey Sytzov, head of the consulting firm SovEcon, said that such a high quota could not limit exports, and that monthly exports between February and June could not exceed 5.
5 million tons, since the freezing weather during this period caused river transport to be closed
for a certain period.
Analysts point out that Western sanctions have caused Russian wheat exports to be slow.

 

Russia's cereal exports in 2022/23 were 16.
8 million mt as of Oct.
15, down 13%
year-on-year, according to the Russian Grains Association.
Arkady Tsirochevsky, president of the association, said export delays were serious and supplies were high
.
Russian weather usually gets bad from December to January, with shallow ports and rivers freezing, which will affect
the pace of exports.

 

Argentine wheat production was revised downward

 

Argentina's wheat production in 2022/23 is expected to be 15 million mt, down from 16 million mt last week and well below the previous year's record output of 23 million mt, the lowest in seven years, as late frosts further damage
the wheat crop already affected by drought, the Rosario Grain Exchange said.
The Buenos Aires Grain Exchange also this week also cut Argentine wheat production in 2022/23 to 15.
2 million mt from an earlier forecast of 16.
5 million mt as months of dry weather in Argentina, coupled with late frosts, took a toll
on crops.
In its October supply and demand report, the USDA lowered its forecast for Argentine wheat production to 17.
5 million mt, down from 19 million mt
forecast last month.

 

Heavy rains and flooding threaten crop yield prospects in Australia

 

Australia's 2022/23 cereal harvest may be near record highs, but heavy rains sweeping across Australia's eastern coast could reduce production
, Rabobank said in a research report.
Heavy rains caused severe damage to crops, and some farmers were unable to access their fields
.
Australian cereal production in 2022/23 is likely to be close to a record 61.
9 million mt, down 1% year-on-year but 41%
above the five-year average, according to Rabobank's 2022/23 Australian crop forecast.
Wheat production is expected to be 35.
5 million tonnes, down 2% year-on-year but 47%
higher than the five-year average.
However, the report notes that these are predictions
before the recent heavy rains.
At present, the east coast of Australia is plagued by heavy rainfall and flooding
.
Farms from central Queensland to Victoria in Australia have seen 400 to 600 mm of rain
.
The Australian Bureau of Meteorology (BOM) predicts 100 to 150 millimetres of rain
over the next 10 days.
The Bureau of Meteorology warned that La Niña would bring above-average rainfall to the East Coast while causing slightly below-average
rainfall on the West Coast.
Since La Niña has brought in a lot of rain over the past two years, this year's rains could be even more
devastating.
Rabobank said it was too early to quantify the impact of heavy rainfall and flooding in recent days on the state's overall food production, but rainfall had had a significant impact on crop yields in low-lying areas, many of which were already in stagnant water, although the highlands fared better
.