Expected Ukraine export resumption pressure wheat futures to five-month lows

GLOBAL—Reaching pre-Russia-invasion-of-Ukraine levels, wheat futures have fallen to five-month lows on the strengthening likelihood that Ukrainian grain will resume exports from the Black Sea.

Wheat for delivery in September 2022 closed at US$7.84 per bushel a week before the Russian invasion, jumping to US$12.79 per bushel. By 1 July, this contract had dropped by roughly one-third, to US$8.46 per bushel.

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This drop was felt in the US too where Wheat traded on the Chicago Mercantile Exchange finished the week with a decrease of 12.4 percent, when it fell to the lowest level since February 2022 with US$ 7,6575.

A possible explanation for this is the market may be anticipating that a recession will weaken demand for agricultural commodities.

According to Pat Westhoff, a University of Missouri professor of agriculture and applied economics, and director of the Food and Agricultural Policy Research Institute, declines in the stock market are typically an indicator that investors are less optimistic about the economy.

In the USA, the fall was however tempered by growing export demand for US supplies, with the US Department of Agriculture noting in its weekly Export Sales report that 1.047 million tonnes of US wheat were sold in the week ended July 7.

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This was the largest weekly amount since March 2020 and well above trade estimates that ranged from 200,000 to 500,000 tonnes.

In other Bulgaria however, news of Ukraine’s possible export resumption has not been well received and the cheap wheat from Ukraine has been reported to undermine the country’s grain market in harvest seasons.

With the country currently in harvest season, farmers have expressed their dissatisfaction over the uncontrolled imports of cereals from Ukraine and Moldova.

Neli Stoyanova, the chairman of a Bulgaria agricultural cooperative reported that wheat is slated to be over soon yet despite their good yields there is no interest in buying the commodity.

“The cheap imports have destroyed the market for local produce, said the chairperson of the Dobruja Union of Grian Producers,” Radostina Zhekova. According to her, there is no phytosanitary control of incoming goods from Ukraine.

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