The business drought continues: the volume of wheat traded is the lowest in at least seven years

The business drought continues: the volume of wheat traded is the lowest in at least seven years

Between contracts and fixings, average wheat purchases fall more than 53%. Planting 2023/24 is progressing in line with previous years. Despite the war, Russia closes a record season and goes for another record high.

It is no news that the 2022/23 wheat production is about half of the 2021/22 crop. The impact of the drought on production is also influencing wheat marketing. Against this background, the volume of wheat contracts and fixings fell by more than 53% compared to last season. While in the first half of last year an average of 2.2 Mil Mt of wheat was traded per month, in the first half of 2023 the volume traded barely exceeds one million tonnes.

Of this traded total, most wheat corresponds to the current season. Sales to harvest for the next season are barely half a million tonnes. The 2023/24 wheat to be harvested in December represents only 8% of the wheat sold in this first half of the year, far from the 37% that represented the new wheat in last year’s marketing.

The production outlook remains optimistic, with “good births and a lot of uniformity” in terms of production, as highlighted by GEA. However, the discreet commercial dynamism of the Physical Grain Market of the Rosario Stock Exchange can be explained by the current poor season and the caution about the definition of yields of the next wheat harvest. This commercial discretion, together with the extension of wheat shipments for 360 days announced in November 2022 and this year’s export decline, explains why there are still no foreign sales of wheat 2023/24, when at this point last year there were 8.6 Mil Mt and two years ago more than 3.1 Mil Mt.

Wheat sowing rhythm aligned

The partial recovery of moisture in Argentinean soils has allowed good progress for sowing. The rainfall balance of the first half of the year was very positive for the planting of the next fine season. In this sense, more than 4.6 million hectares have already been sown with wheat.

This area advance is practically in line with last year’s levels. If we take the target area estimate of the Secretariat of Agriculture, Livestock and Fisheries (SAGyP), which expects just over 6 Mha, sowing is only two points below last year in relative terms. However, we should not forget that the 2023/24 season would come with 150,000 more than the current crop, according to the Secretariat. On the other hand, if we were to take GEA’s area estimate of 5.6 Mha, sowing progress would already be over 82% respectively.

Russia closes a record season and goes for another record high

With the end of June, Russia’s 2022/23 wheat season comes to an end, the first completely war-torn season. The Russian-Ukrainian crisis continues to have a strong impact on world commodity markets. In the case of wheat, volatility and uncertainty have been common place for the market, as Russia and Ukraine account for around 30% of world trade in the grain.

Despite the conflict, Russia had its largest harvested area, best yields, and largest initial stocks in history. Three records that also allowed it to consolidate the largest wheat export volume on record with 45 Mil Mt and an increase of 35% over last year. Moreover, this was the second year of Russia’s largest share in world wheat trade. One in five tonnes of wheat exported worldwide last season originated in Russia.

The record Russian harvest and the Black Sea grain agreement, which allows the Ukrainian crop to be exported, have been two major factors in explaining the decline in wheat prices in recent months. Wheat prices in Chicago today are about 18% lower than at the same time last year, while the decline in the MatbaRofex December position is more than 19%.

However, we must not lose sight of Europe and the United States, which are seeing their crops affected by the lack of water. In this regard, US spring wheat lost 2 pp more of good-excellent condition this week, and the condition is already 18 pp behind last year’s level.


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