Will the ships loaded with wheat soon leave the Ukrainian ports of Odessa, Pivdenny and Chornomorsk to deliver their precious cargo all over the planet? This prospect sent a chill to the grain market. On Euronext, a ton of wheat to be delivered in September ended Friday, July 22, at 325 euros, losing 25 euros in a single session. Compared to the historic high, at 438 euros per ton, reached in mid-May when the markets were soaring, the decline is almost a quarter of the total price. Same trend in Chicago, where a bushel of wheat was trading at 7.70 dollars (about 7.50 euros), down more than 40% from its peak in March.
The invasion of Ukraine by Russian troops on February 24 propelled grain prices to stratospheric levels, while the precious grains had already been highly valued for several months, driven by massive purchases by China and by the influx of money injected into the major world economies to get through the crisis caused by Covid-19. The war started by Vladimir Putin has caused operators to lose control. Suddenly, the grain flowed more or badly from Ukraine and Russia, breadbasket of the planet, concentrating a third of the world trade in wheat. The fear of a lack of availability of an essential food for human consumption caused a bout of fever.
Since then, price trends, which are very volatile, remain dependent on geopolitical movements such as weather forecasts. Variations amplified by financial speculation. Already, at the beginning of June, the discussions launched by Mr. Putin to create a corridor in the Black Sea in order to facilitate the export of Ukrainian cereals had led to a market correction.
Finally, common ground was found between the belligerents and an agreement was signed on Friday July 22 by Ukraine and Russia with Turkey and the UN. Financial players reacted immediately by causing wheat and corn prices to fall in its wake. They are counting on an easier flow of stocks but also of the next harvest.
“Wheat stocks for the 2021 harvest are estimated at between 6 and 6.5 million tonnes in Ukraine and double in Russia”, says Nathan Cordier, from Agritel. To this will be added the fruit of the current harvests. “The harvest has started well in Ukraine, it could be between 20 and 22 million tonnes”, predicts Mr. Cordier. If the war has reduced the grain potential of the invaded country, this is not the case with the aggressor. Russia prides itself on harvesting between 88 and 91 million tonnes of wheat this summer.
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