Black Sea supply eclipses all else

Supply estimates for wheat have undergone reductions in several major producing nations. The EU Commission, for instance, has downscaled its expectations for Europe’s nearly completed wheat harvest to 133.3 million tonnes, marking a decrease from last year’s 134 million tonne crop. We’ve been watching conditions in Argentina closely. After last year’s drought, it is still very dry and yields have begun deteriorating. While they have been getting some rain recently, much more is needed to turn around the bleak outlook.

The rally in Russian wheat prices has started to reverse. SovEcon reports that wheat exports from Russia in August are estimated to surpass 5Mt, a significant increase from the 3.5Mt during the same period last year. The market seems to have come to terms with the temporary loss of the Black Sea Grain Initiative, as ample Russian supplies are contributing to a price-weakening trend.

CBOT Dec ’23 wheat futures have experienced a decline of AUD $20 or 6% over the week. Conversely, local new crop prices have managed to remain relatively stable despite the downward trend in international values. APW’s new crop in Geelong fell just 1% week on week to $395/t while Kwinana held at $412/t.

This week, StatCan’s estimates for Canada’s 2023/24 wheat output stand at 29.5Mt, reflecting a nearly 5.0Mt year-on-year drop. Severe drought conditions across the Prairies have negatively impacted spring wheat yields, offsetting an increase in planted hectares. The canola crop is similarly affected by dry and hot growing conditions, with a projected year-over-year decline of 6.1% to 17.6Mt. This would mark the smallest harvest in nine years. While Alberta has seen recent rainfall, it’s unfortunately a case of “too little, too late” as harvest is well underway.