On Monday, wheat futures on Euronext soared to a 14-month high, driven by forecasts of reduced harvests in Ukraine, African countries, and the Russian Federation. This increase in prices provided support to the Ukrainian wheat market.
Memorial Day Closure and Euronext Movements
While U.S. stock exchanges were closed for Memorial Day, wheat prices on the Paris Euronext continued to climb. The surge was influenced by predictions of lower wheat yields in Ukraine, parts of Africa, and Russia.
Impact of North African Drought
According to the MARS monitoring report from May 27, drought conditions in western North Africa, particularly in Morocco and northwestern Algeria, are expected to significantly reduce wheat yields. This situation is likely to increase the region’s reliance on wheat imports.
Euronext Wheat Futures at 14-Month High
September wheat futures on the Paris Euronext rose by nearly 3% to €269 per ton ($292.6 per ton). This marks a 4.9% increase for the week and a 14.3% increase for the month. Traders remain concerned about reduced wheat production forecasts in Ukraine and Russia, despite MARS experts raising the EU’s 2024 wheat yield estimate to 5.71 tons per hectare from an average of 5.65 tons per hectare over the past five years.
Revised Harvest Forecasts for Russia and Ukraine
For the fourth time in a month, IKAR analysts lowered their grain harvest forecasts for Russia in 2024, now estimating 129.5 million tons, down from 132 million tons. Specifically, the wheat forecast was reduced from 83.5 to 81.5 million tons due to frost damage in central regions and the Volgograd area, as well as insufficient rainfall in the European part of Russia, particularly the south. Grain export estimates for 2024/25 were also reduced from 57 to 55.5 million tons, with wheat exports lowered from 45 to 44 million tons.
In Ukraine, UZA experts have revised the 2024 grain and oilseed crop production forecast down by 1.5 million tons to 74.6 million tons, compared to 82.8 million tons in 2023. The wheat production forecast was specifically lowered by 0.9 million tons to 19.1 million tons, down from 23.1 million tons in 2023. Consequently, grain exports are expected to drop from 53.2 to 43.5 million tons, with wheat exports decreasing from 17.5 to 13 million tons.
Rising Prices in Ukraine
Following the dollar exchange rate, export purchase prices in Ukraine continue to rise. Prices for food wheat have reached $200-205 per ton (UAH 9,200-9,400 per ton), and fodder wheat prices have climbed to $190-192 per ton (UAH 8,500-8,600 per ton) with delivery to Black Sea ports.
Weather Outlook and Potential Price Stabilization
Precipitation predicted for the coming days in Ukraine and southwestern Russia could improve harvest potential, which might halt the rise in prices.
Commentary
The recent surge in wheat futures on the Euronext reflects the significant impact of global weather patterns and geopolitical factors on agricultural markets. The reduced production forecasts in key wheat-producing regions underscore the vulnerabilities in the global supply chain. For Ukraine, rising prices offer some financial relief amidst lower yield forecasts, but the situation remains precarious. As we monitor these developments, it becomes clear that adaptability and proactive measures in agricultural practices will be essential to navigating these challenges. Continued investment in weather resilience and efficient logistics will be critical for stabilizing the market and ensuring food security.