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International
A fifth vessel chartered by the United Nations (UN) World Food Program has departed from the
Ukrainian Black Sea port of Chornomorsk loaded with 30.0 TMT of wheat destined for Ethiopia.
The World Food Price Index kept by the UN has fallen for the sixth month, further retreating from
all-time highs after Russia invaded Ukraine. The index decreased from 137.9 in August to 136.3 in
September, though still 5.5 percent higher than in 2021. September's decrease was driven primarily
by a 6.6 percent decrease in the price of vegetable oil, while sugar, dairy, and meat prices inched
lower by less than one percent. Meanwhile, the cereal price index increased by 1.5 percent as dry
weather in Argentina and the U.S. and uncertainty in the Black Sea ignited renewed concern over
supplies.
The Baltic Exchange’s main sea freight index, which tracks rates for ships moving dry bulk, fell for the sixth consecutive session on Thursday to mark its worst day since mid-September, as rates slipped across all vessel segments. The overall index, which factors in rates for capesize, panamax, supramax, and handysize shipping vessels, fell 55 points, or about 3 percent, to 1,818. Average daily earnings for panamax vessels dropped $527 to $18,796.
The dollar climbed to a fresh 24-year peak versus the yen on Wednesday, while sterling rose after a sharp fall in the previous session. The pound gained following a drop to a two-week low versus the dollar and euro late Tuesday after the Financial Times reported that the Bank of England signaled privately to lenders that it is prepared to prolong its bond purchases.
The dollar fell against most currencies in volatile trading on Thursday after initially spiking following a hotter-than-expected U.S. inflation report. The euro also fell against the dollar, initially to a two-week low, then rebounded to trade up 0.8 percent on the day at $0.9773. A report from the European Central Bank indicated fewer than previously forecast rate hikes might be needed to tame inflation, suggesting the situation in the eurozone may not be as dire as many thought.
Domestic
For the first week of October, U.S. crop exports at the Louisiana Gulf Coast terminals were at their
lowest level in nine years due to low water on southern sections of the Mississippi River, halting
barge traffic. USDA reported that 976.3 TMT of corn, soybeans, and wheat were inspected for
export at the Mississippi River Gulf coast, down 22 percent from the five-year average. Though
two sections of the river reopened over the weekend, shippers are still loading less grain per barge
to avoid getting stuck.
In a statement on Monday, the U.S. Coast Guard announced that two sections of the southern
Mississippi River were reopened to commercial traffic over the weekend. The northbound lane has
been cleared, and as of Monday morning, 22 tow boats and 392 barges were waiting in the
southbound line. The vessel lineup ballooned to 100 tow boats and 2,000 barges last week, sending
freight rates and grain barge premiums to historic highs.
The U.S. Treasury Secretary Janet Yellen called on the G20 finance and agriculture ministers to
increase aid for food security in areas most adversely impacted by the war in Ukraine.
Black and other minority farmers filed a class action lawsuit against the U.S. government on Wednesday, claiming the recent repeal of a Farm Service Agency (FSA) debt forgiveness program that specifically addressed farmers it described as “socially disadvantaged” that included Black, Native American, Hispanic, and Asian farmers amounted to a breach of contract by the government. The suit comes as the USDA prepares to institute an amended debt relief program, passed as part of the Inflation Reduction Act that allocates relief based on economic need rather than race.
Australia
Due to favorable weather, wheat production in Western Australia is expected to be 12 percent
above the previous estimate at 12.05 MMT.
Rain in Australia’s eastern growing region may harm wheat quality. In the coming days, parts of
Victoria, New South Wales, and Tasmania should prepare for another 100 mm (4 inches) of rain
over two days this next week. Ole Houe, director of advisory services at agriculture brokerage
IKON Commodities in Sydney, said, “Nearly half the wheat crop, or around 6.0-7.0 MMT, is at
risk of quality downgrades in NSW”.
Asia
China set its tariff rate quota for wheat, corn, and rice imports in 2023 at the same volumes as last
year at 9.6 MMT for wheat, 7.2 MMT for corn, and 5.3 MMT for rice.
Heavy rains have damaged summer-sown crops in India, potentially fueling more significant food
price inflation and subsequent export restrictions.
Europe
Paris wheat rose on Friday due to persistent worries over disruptions in Black Sea supplies.
December wheat on Paris-based Euronext closed up 1.0 percent at €348.50 ($340.76)/MT.
Euronext wheat futures spiked on Monday to a three-month high after Russian airstrikes on
Ukraine cities in retaliation for a blast on the bridge to Crimea. December wheat on Paris-based
Euronext settled down 2.3 percent at €356.00 ($345.54)/MT.
European wheat futures fell on Tuesday after rising by 4.5 percent in a previous session as the
market awaits potential escalation between Russia and Ukraine. December wheat on Paris-based
Euronext closed up 4.7 percent to €364.50 ($353.38)/MT.
French farmers have harvested 67 percent of the corn crop as of October 3, a sharp increase from
6 percent the same week last year. Harvest is currently 28 days ahead of last year’s pace and
18 days ahead of the five-year average due to a hot, dry summer that accelerated plant growth.
Corn production in the European Union is expected to fall to a 15-year low due to historic drought
and dryness during critical growth stages. The European Commission cut its forecast for EU corn
production to 55.5 MMT.
Soft wheat exports from the EU have reached 9.8 MMT, down from 10.02 MMT in 2021.
The English wheat harvest has been projected at 14.4 MMT, up 12 percent from last year, due
primarily to an 11 percent increase in yields of 8.6 MT/hectare (125 bushels/acre).
Euronext wheat fell for a second day on Wednesday, retreating further from a three-month high, as a tender purchase by Algeria underscored competition from Russian supplies despite an escalation in Moscow's war with Ukraine. Higher-than-expected U.S. wheat stocks published in the WASDE report released near the end of the European session also curbed prices. December milling wheat on Paris-based Euronext settled down 0.8 percent at €353.25 ($342.02)/MT.
Euronext wheat closed higher on Thursday to snap a two-day slide as Russia warned that it could oppose extending a shipping deal for Ukrainian grain put the focus back on wartime disruption to Black Sea grain trade. December milling wheat on Paris-based Euronext settled up 0.8 percent at €356.25 $348.31)/MT.
Farm office FranceAgriMer on Wednesday raised its forecast for French soft wheat exports outside the European Union to 15 percent above last season but said sales would depend on whether a Ukrainian grain export corridor was extended. Soft wheat shipments outside the 27-member bloc are now seen at 10.1 MMT, up from July’s 10.0 MMT. France recorded a slight drop in output this year due to drought but saw demand rise over the summer as the Russia/Ukraine conflict disrupted Black Sea exports.
Strikes continue in France, causing widespread fuel shortages and raising concern about disruption to the grain sector. About half of crop farms and 40 percent of grain-sector companies reported they were low on fuel, potentially causing delays in cereal sowing and deliveries of food staples. Grain industry group, Intercereales reported there are entire regions without fuel supplies.
The Black Sea
The wheat harvest has wrapped up in Ukraine, with 19.2 MMT harvested from 4.7 million
hectares (6.67 million acres). The 2022 harvest is down compared to the 32.2 MMT harvested in
2021 before the hostilities began with Russia.
As of October 10, 41 percent of the expected winter wheat acres have been planted on 1.6 million
hectares (3.9 million acres). The data does not consider the occupied areas of Donetsk,
Zaporizhzhia, Luhansk, and Kherson.
The Russian wheat harvest has reached 103.3 MMT.
The Russian wheat export tax for the week of October 12 to 18 has decreased to 1,926.8 rubles
($29.76)/MT.
Russia’s Deputy Prime Minster indicated that Russia might eliminate its grain export quota,
typically put in place in the second half of the marketing year, due to a record harvest.
Russian wheat prices increased last week as the ruble weakened against the dollar and limited
supply offers to the Russian domestic market. Russian wheat was up $2.00/MT to $327.00/MT
FOB. Russian farmers have made considerable planting progress, with 11.6 million hectares
(28.6 million acres) sown.
Belarusian President Alexander Lukashenko has ordered troops to deploy with Russian forces in
response to planned attacks on territory in Belarus.
Moscow has submitted a list of concerns to the United Nations, which include it’s difficulty in selling fertilizer and grain, and is prepared to reject renewing the Turkish agreement allowing grain exports through Black Sea ports. In an attempt to keep the Black Sea ports open, Turkey’s president has offered to work with Moscow to determine low-income countries to which Russian grains and fertilizers can be exported. U.N. officials are due in Moscow on Sunday to discuss renewal of the agreement.
Agricensus reported Russian wheat remains the most competitive in the international market, with exports for the week to October 13 up for a third consecutive week and expected to continue through the end of the month. For the week, wheat exports from Russia's deep-sea ports reached 965.4 TMT, with cargoes going to Egypt, Turkey, Sudan, and Bangladesh, with an additional 55.0 TMT ready for shipment to Saudi Arabia, Yemen, South Africa, Oman, Algeria, Syria, and Israel. Port line-up data for the last half of October shows another 1.9 MMT currently loading for departure to Saudi Arabia, Algeria, Turkey, and Egypt.
Latin America
Dry conditions continue to plague the Argentine wheat crop. Wheat in the good to excellent
category held firm at 14 percent, while the portion of the crop in poor to very poor condition
increased by 1 percent to 46 percent.
Typically a net fertilizer importer, Brazil is reexporting cargos due to storage constraints and slow
farmer buying after a surge of inbound shipments earlier this year.
Brazil’s Rio Grande do Sul state is expected to harvest an all-time high 4.6 MMT of wheat in 2022, up 32.1 percent over last year’s 3.5 MMT. Planted area increased to 1.45 mh, up 18.6 percent from last year’s 1.2 mh. Yield is now projected at 3,210 kg/ha (2,494 lbs/bu), an 11.2 percent increase over last year’s 2,885 kg/ha (2,242 lbs/bu). The government is encouraging producers in Rio Grande do Sul to increase production on increased export prices and rising domestic prices.
The Rosario and Buenos Aires grains exchanges cut their forecasts for Argentine wheat production amid adverse crop weather. Rosario sees this year's wheat harvest at 16.0 MMT, down 500.0 TMT from its previous forecast, as drought and low temperatures weigh on the crop. In a separate 2022/23 wheat crop estimate, Buenos Aires grains exchange forecast a harvest of 16.5 MMT, down almost six percent from its prior forecast of 17.5 MMT. Argentina, a major exporter of wheat and its role in the global market, has come into greater focus amid a worldwide supply crunch linked to Russia's invasion of Ukraine. With production reaching a seven-year low, the government is considering a limit on wheat exports.
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