Milling wheat will set price records in the new season

Source:  Agravery.com
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Declining wheat production in Ukraine and globally, as well as declining stocks, will be significant factors behind the record rise in food grain prices in the new season. Weather risks could be a decisive factor in maintaining the upward trend. This was discussed on May 8 during the analytical briefing of the PUSK cooperative, created within the VAR.

“The supply of wheat will decrease significantly in the new season. Ukraine’s stocks do not exceed 5 million tons, while last year at this time they amounted to 8 million tons. In May, 1650 thousand tons were contracted for export. According to the first estimates, production will not exceed 19-20 million tons, compared to 23 million tons harvested last year. Accordingly, Ukraine will be able to export no more than 13-14 million tons in the new season.

The EU expects wheat production to decline by 10 million tons, and the US also expects a decline. In Russia, forecasts of a record harvest have shifted from expectations of a decline in production. In some countries, the forecasts are lowered due to the weather, and in particular in the United States, wheat was not profitable for farmers, so it was sown less. As stocks and production are declining, we have minus 2-3 million tons of export potential in Ukraine – these are objective factors for wheat to be more expensive in the new season. Prices at $200-210 per ton of milling wheat will be the minimum we will see in the fall and winter. Weather risks will additionally “push” both the exchange and traders,” the PUSK believes.

According to analysts, the demand and price for milling wheat are already growing, buyers are accumulating stocks. Another factor that contributes to the intensification of trade in Ukrainian wheat is cheaper logistics.

“Recently, the freight price has been losing $2-4 per ton every week. This has a positive impact on wheat prices on the CPT market. As a result, we see an increase in grain trade. Let me remind you that May-June are often marked by downward trends in the physical market, especially on the CPT basis. However, in the new season, as already mentioned, milling wheat may reach record prices, which will happen not earlier than September,” the PUSK added.

By the end of this week, the conditional prices for wheat on CPT basis will be $190-195 in shallow water, $180-185 in deep water ports. And also $205-210 per ton on DAP/CIF Constanta.

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