Wheat: War-stressed wheat market faces moment of truth

The world tight wheat market is entering a critical period.

July is a crucial part of the year as it is the time when harvests begin in much of the northern hemisphere and exports pick up. The invasion of the main Ukrainian producer has already crippled its sales and attention is now turning to how the war will affect new season shipments and the ability of other countries to fill the gaps.

Ukraine resorted to exporting everything it could by rail and river, with seaports blocked. Meanwhile, Russia is poised to reap one of its biggest harvests, though war-related logistical and financial constraints remain key questions over how much it can sell.

The pace of sales from the Black Sea – which historically accounts for a quarter of world trade – could be in focus more than ever. Despite their recent drop, wheat prices are much higher than normal for the time of year. This contributes to food inflation and prompts world leaders to commit to do more to tackle the hunger crisis.

“We’ve never traded grain in a wartime market before, so this is all new,” said Dan Basse, president of Chicago-based AgResource. “The Russians are going to have a situation where they are going to export wheat, but it won’t be as easy.”

Wheat shipments from the top exporter, Russia, have remained largely normal since it invaded Ukraine, going to traditional customers. With the arrival of new crops, the coming months will show whether he can sell the large volumes typically seen when exports peak.

Ukraine’s export outlook remains bleak for now. There has been little progress towards restarting maritime trade, terminal closures threaten to limit grain shipments to less than half of their potential and Russian strikes have damaged harvesting facilities at ports. Volumes in June were 44% lower than last year.

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Any loss in the Black Sea means that importers will become more dependent on alternative shippers like the European Union. Even the United States – often one of the most expensive origins – has become more competitive.

There are already signs of a shift in the trade. Egypt reserved 350,000 tonnes of French wheat in a tender this week, double the amount bought from Russia. The huge French volume is unusual, especially at the start of the season when Egypt normally buys from the Black Sea, adviser Agritel said.

Aside from tenders, the North African country also recently purchased its first U.S. shipment of soft red winter wheat since 2019.


Although Russia has plenty of wheat, its exports face challenges. Its agricultural sector has not been targeted by sanctions, but unofficial measures have seen some banks and shipping companies cut credit lines and services.

This makes it difficult to estimate exports. AgResource expects Russian wheat exports to reach around 32 million tonnes this season and FAO-AMIS expects 35 million tonnes, close to last year’s level. Meanwhile, the US government is setting them at a near-record level of 40 million tons, and consultant SovEcon predicts they will top 42 million tons.

Either way, shipments need to grow quickly to reach their potential, and Russia’s plans to change a grain export tax could affect sales.

“On paper, they have exports,” said Matt Ammermann, head of commodity risk at StoneX. “It’s just that there are clear reasons why they can’t export freely.”

(With help from Michael Hirtzer)

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