Ukraine grain export deal injects further volatility
© Tim Scrivener The grain price rollercoaster continues, with the prospect of exports from Ukraine the focus of the market’s nerves.
Prices fell as a UN-brokered agreement was signed on 22 July to allow a safe export corridor, only for feed wheat futures to gain £15/t by midweek, following Russian missile strikes on the port of Odesa at the weekend.
The lower prices prompted by anticipation of the Ukraine deal led to some significant sales, with Egypt buying 760,000t of wheat, mainly from France and Russia, while Pakistan put out a tender for 200,000t.
Regional ex-farm prices on Wednesday 27 July were £240-£256/t for feed wheat, as available, and £207-£223/t for feed barley.
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Harvest movement sales would usually be limited mainly to grain for which there was no on-farm storage.
However, the current level of volatility meant UK growers were still alive to the market, said Frontier Agriculture trader Zoe Andrew.
“I can’t feel that every question has been answered [by the Ukraine agreement],” she said, citing insurance and potential crewing issues. “Exports for Ukraine were 5m tonnes/month before the war – I think the market feels that is a big ask.”
Trial vessel
Elena Neroba, business development manager of Ukrainian grain trader Maxigrain, said a trial vessel would be making the trip out of the Black Sea this week, so that some of the 38 vessels already in Odesa might then be able to move in convoy.
The movement of grain was crucial to being able to plant the 2023 crop, she said, with ex-farm prices well below £100/t at present because of the huge logistics costs of moving grain by land.
“That doesn’t even cover the cost of growing,” she said.
At a briefing by the Ukrainian government on 25 July, Mykola Solskyy, minister of agrarian policy and food, said: “We don’t want to lose our agriculture – it’s a matter of survival for the whole industry. Farmers need income to plant the next crop.”
At the briefing it was also said that despite the two missile attacks on Odesa at the weekend, plans were progressing to facilitate shipments from Odesa and two other ports.
The eastern regions of Ukraine where Russia has launched its offensive account for about 23% of Ukraine’s agricultural production.
The agreement is due to run for 120 days. The first ships are likely to be state owned, said Oleksandr Kubrakov, Ukrainian minister of infrastructure. This would allow the insurance sector to assess underwriting risks.
EU crop yield forecasts drop on heat and drought
Drought stress in EU wheat, barley and maize crops has caused the International Grains Council to reduce its forecast for 2022-23 global grain production, trimming it by 3m tonnes to 2.25bn tonnes.
The outlook for consumption was reduced by the same amount on the back of expected lower feed use.
This week’s EU Commission Mars crop monitoring survey also reduced the yield outlook for crops in many member states.
At EU level, the yield forecasts for grain maize, sunflowers and soya beans were most markedly reduced (by 8% to 9%) and are now well below the five-year average, according to the report.
Wheat was forecast to average 5.54t/ha, compared with the five-year figure of 5.62t/ha. Winter barley was put at 5.72t/ha against the five year average of 5.75t/ha.