In W23 in the wheat landscape, the USDA expects global wheat reserves in the 2022/23 season at 266.66 million mt, up 0.14% from the May projection of 266.3 million mt, and above the market expectation of 266.4 million mt. For the 2023/24 season, the USDA expects global wheat stock to rise from 264.3 million mt to 270.7 million mt, above expert’s estimates of 264.2 million mt. Global wheat quotations on world exchanges began to recover, following price declines in W22 to the lowest level since 2021. This is attributed to increased speculative demand and purchases by importers. Wheat price increases are also supported by the uncertainty with the harvest in the US and Australia, where the production is expected to be lower than 2022, as well as the possible termination of the grain agreement due to the Russians blocking the passage of ships to the Ukrainian ports. ABARES forecasts Australia’s 2023/24 wheat production to reach 26.2 million mt, a decrease of 34% YoY due to reduced rainfall as a result of the El Niño phenomenon. Similarly, the USDA estimates the Australian wheat crop in the 2023/24 season to reach 29 million mt, down 25.6% compared to 39 million mt in MY 2022/23. Russian inspectors continue to block the operation of the Black Sea corridor. Since May 31st, no inspection of vessels has been carried out. Thus, Ukraine has published plan B for withdrawing from the grain Black Sea corridor agreement with Russia and continuing exports from Black Sea ports under state guarantees for shipowners.
The USDA estimates US wheat stock in the 2022/23 season at 16.28 million mt, unchanged from the May projection but down compared to the market expectation of 16.49 million mt. For 2022/23 US wheat production, the USDA adjusted upwards its forecast from 45.16 million in May to 45.32 million mt, but down compared to the market expectation of 45.35 million mt. The USDA also indicates that in the week ending June 1st, US wheat export inspections reached 291.6 thousand mt, down 99.69 thousand mt WoW and 63.74 thousand mt YoY. US wheat shipments were mainly destined for Mexico and the Philippines. At the start of the 2023/24 season, US wheat inspections were at 57.69 thousand mt, down compared to 226.71 thousand mt in 2022/23. Furthermore, the USDA outlines that as of June 5th, 36% of US winter wheat was rated good to excellent, up 2% WoW, with 82% headed, up compared to 81% normally in early June, and 4% harvested, matching the 5-year average. Meanwhile, 64% of US spring wheat was rated good to excellent, with 93% planted, in-line with the typical rate, and 76% emerged, up compared to 74% on average.
Rusagrotrans estimates Russian wheat exports in Jun-2023 to reach a record 2.8-3 million mt, up from the previous estimate of 2.6-2.8 million mt against the backdrop of unrealized demand in May-2023. In May, Russian wheat exports amounted to 4.16 million mt, including shipments to the EAEU, down 2.8% MoM. This reduction is linked to the decline in shipments registered at the Kavkaz port and at the KSK terminal in the last week of May-2023. Export demand prices for Russian wheat with 12.5% protein for delivery in June-July fell to USD 225-230/mt (minus USD 10.5). Also, bid prices fell by USD 20 to USD 240/mt. According to NTB on June 2nd, the exchange index of wheat (CRT Novorossiysk) amounted to USD 170/mt (without VAT), 1.72% higher than on June 1st. However, by June 5th, the index fell to USD 160/mt. Meanwhile, the wheat index (FOB Black Sea) at NTB dropped from USD 261.7/mt on June 2nd to USD 255.7/mt on June 5th, down 2.3%. SovEcon adjusted upwards 2023/24 Russian wheat exports by 2.7 million mt to 45.7 million mt. Both Russian wheat exports and total grain shipments are expected to be the highest on record. The upward adjustment is due to an increase in the Russian wheat crop estimates and the assurance by the Russian Ministry of Agriculture that it has no plans for intervention purchases. Therefore, experts expect a strong start in deliveries at the beginning of MY 2023/24, given the high profitability of export operations. Also, according to SovEcon, the cessation of Russian grain supplies by several large transnational traders is unlikely to have a noticeable impact on export volumes. The launch of a new deep-water terminal in Vysotsk (Leningrad region) with a capacity of 4 million mt per year can increase the export of Russian grain.
Tridge’s analysis indicates that the Hungarian wheat farmgate price in W2 of June increased by 9% WoW to USD 0.38/kg. The price hike is attributed to the ban on wheat imports from Ukraine and the increasing demand for Hungarian wheat. Previously, the Hungarian wheat market was flooded with cheap Ukrainian wheat, driving down the prices and negatively impacting domestic Hungarian wheat producers. The first policy of the import ban was enforced on May 2nd and was supposed to last until June 5th. However, the EU has extended the import ban until September 15th due to a lack of sufficient storage facilities. During this period, Ukrainian cereals can still be transited to Hungary for imports to other EU countries and outside the EU, but cannot be sold directly in the Hungarian market. The ban on Ukrainian wheat imports has created an opportunity for domestic producers as demand has shifted to Hungarian wheat. Hungarian wheat producers can offer higher prices given the increasing demand and less competition from cheap wheat imports. Lastly, in the Jan-Apr period, Peruvian wheat imports amounted to 575.99 thousand mt, valued at USD 235.27 million CIF, down 19.45% in volume and 13.18% in value compared to the same period in 2022. According to Agrodata, wheat imports were mainly sourced from Canada (USD 184.37 million), Argentina (USD 33.78 million), the US (USD 16.15 million), and the UK (USD 975.09 thousand).
