The talks between Russia and Turkey (a Ukraine representative was not invited) were a non event. Russian demands of reduced sanctions and de-mining the Black Sea were offset by Ukrainian concerns that this would simply allow Russian attacks by sea. Turkey has offered to provide naval escorts, but the reality is that a de-mining exercise would take 2-3 months to complete and does nothing to allay Ukrainian concerns.
Recent rains of 15-30mm through Ukraine has helped crop prospects there, but a quick look at rainfall in the critical southern Russian wheat areas shows a deficit building. Combined with higher temperatures, it is thought that stress is building in those crops leading into grain fill. SovEcon are still estimating a Russian crop of 88mmt with exports over 42mmt. The realisation of exports totalling in excess of 3mmt a month will depend on whether buyers can access Rubles and whether the trade can find shipping lines willing to take the risk. The US has ‘warned’ about 14 North African nations that the “Russian” wheat they are buying may in fact be Ukrainian. However, morals might take a back seat when people are hungry.
US winter wheat harvest has started at 6% complete. The sample size is probably not big enough yet to draw any conclusions about deviations away from ‘average’ yields, but information to hand suggests that yields will be highly variable.
While the sum of all this ‘bad news’ around wheat and an impending food crisis, the fact is (on paper at least) there is enough wheat to go around. Russia will again be the bench mark for global pricing, this time without the hinderance of export quota’s. Assuming no ‘humanitarian corridor’, how does Ukraine export this season? Slowly – and this should help to keep prices up.
The week ahead….
A USDA report due out over the weekend should provide some direction for the market. The trade is expecting a bullish reduction in corn acres, but a relatively unchanged wheat and bean stock position. Rain forecast through the Canadian Prairies will be a bearish influence if it materialises as expected.