The Black Sea grain transportation agreement has been renewed! Wheat prices continue to fall!

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It is a matter of global wheat supply, and the grain market is particularly sensitive to the situation in Russia and Ukraine. The black sea port agricultural products export agreement was renewed, and CBOT wheat futures continued the previous decline. As of press time, the intraday low on November 17 had fallen below 800 cents/bushel, as low as 793.75 cents/bushel.

This year, the international wheat market rose explosively and then fell back, and it has risen for six consecutive years, reaching a historical high. CBOT wheat rose by as much as 85.4% from the low point at the beginning of the year to the high point of 1363.5 cents per bushel after the outbreak of the Russia-Ukraine conflict, and then fell by 45.5% to the current intraday low of 743.25 cents per bushel.

The global wheat supply and demand situation is still tightening. According to the USDA report, global wheat ending stocks for the 2022/23 season will decline for three consecutive years (267.8 million tons) despite a likely record global wheat crop (782.7 million tons), as robust demand erodes inventories, and global Consumption of wheat has exceeded production for three consecutive years, and at the same time, the conflict between Russia and Ukraine has made the market unpredictable, which will keep price volatility high.

Rabobank said in a report on Wednesday that the gap between wheat supply and demand will reach 6 million tons next year, as supply remains heavily impacted by the conflict between Russia and Ukraine, and the weather outlook in the European Union, the United States and Argentina is uncertain.

Consumers face an increasingly bleak macroeconomic picture, with energy shortages, geopolitical risks and persistent shortages of key commodities such as wheat boding badly for global food security, the report said.

Prices of agricultural commodities such as feed grains, oilseeds and coffee are expected to fall in 2023 as many major economies enter a recession. But from a historical perspective, agricultural products will remain high.

Carlos Mera, director of agricultural product market research at the bank, said that agricultural product prices may fall, but not because of a substantial increase in production, but because demand will be very weak. Still, agricultural commodity prices are still about 50% higher than they were before the pandemic due to surges in energy, labor and other costs.

On November 16, Robert Spurway, CEO of GrainCorp, one of Australia's largest wheat exporters, said that global grain inventories are at an all-time low, coupled with the continued impact of the Russia-Ukraine conflict and the new crown epidemic, supply pressure is increasing.

The outbreak of the Russia-Uzbekistan conflict interrupted more than a quarter of global wheat exports. The food price index of the United Nations Food and Agriculture Organization (FAO) soared to the highest level in history in March, but it has since fallen back significantly. The index recorded 135.9 points in October, an increase of 3%. Monthly highs are down about 15%, but are still 2% above year-ago levels.

Spurway said in an interview on Wednesday that the supply threat posed by the crisis in Ukraine cannot be mitigated for at least two to three years. Spurway believes that although Ukraine exports some grain through the Black Sea channel, it is still far from keeping up with existing demand. Since the Black Sea Grain Agreement took effect, Ukraine has transported more than 10 million grains through the Black Sea. At the beginning of the Russian-Ukrainian conflict, more than 20 million tons of grains were stranded in Ukraine and could not be shipped out.

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