Reduced harvest in Russia supports high starting wheat prices in Ukraine

Not very favorable weather conditions for winter wheat in Ukraine and Russia will reduce the harvest and export potential for both countries. Therefore, at the beginning of the season, traders are keeping purchase prices high, trying to assess the volume and quality of the new crop.

Heat of 30-35°C in Ukraine and southwestern Russia will improve the quality of wheat, but reduce its yield. However, if temperatures drop in Ukraine on Wednesday, the heat will continue in Russia until the end of the week. The first data on wheat harvesting in Russia indicate that the yield is 0.5-1 t/ha lower than last year.

The MARS agency predicts that in 2024/25 MY Russia will harvest 82.5 mln tons of wheat (93.6 mln tons last year), which is 5% below the 5-year average.

Purchase price of wheat in Ukraine this week increased in the ports of the black sea by 2-3 $/t to 192-195 $/t for food and 175-177 $/t for feed wheat, while last year at this time they amounted to 150-160 $/t.

the main reason for the price increase is the reduction of freight costs from the black sea ports of Ukraine to the level corresponding to the price of freight from Romania and Russia, as well as the reduction of the cost of insurance of risks of entry into the ports of Ukraine amid active actions of the armed Forces of Ukraine against the black sea fleet of Russia, which has completely withdrawn from the Crimea.

In 2023/24 MY, Ukraine increased wheat exports by 8.8% to 18.4 mln tonnes compared to the previous season (although USDA estimated it at 17.5 mln tonnes in June), but in 2024/25 MY it will decrease to 14-15 mln tonnes amid the decline in initial stocks and harvest to 3-year low.

Active harvesting of winter wheat and improving the condition of spring wheat crops in the United States puts pressure on stock prices. According to the NASS USDA, as of June 30, winter wheat in the United States was harvested on 54% of the area (33% last year), and the number of spring wheat crops in good or excellent condition increased by 1% to 72% (48% last year). At the same time, in the U.S., the starting prices for winter wheat are 13-35% lower than last year, and for spring wheat – 28% lower than last year.

July wheat futures yesterday fell:

• by 1.4% to 206.3 $/t – for soft winter SRW wheat in Chicago (233.8 $/t last year),
• by 1.7% to 217.9 $/t – for hard winter HRW wheat in Kansas City (294.4 $/t),
• 0% to 230.75 $/t – for hard spring HRS wheat in Minneapolis (294.7 $/t),
• by 1.4% to 227 €/t or 243.8 $/t – September wheat futures on the Paris Euronext (-14% for the month), which corresponds to last year’s level.

The importing countries will increase wheat production in 2024/25 MY, which will reduce the demand for it at the beginning of the season. However, after the assessment of the harvest in the Black Sea countries, the demand for wheat will increase again. Iran has already announced that it will not export wheat this season. And Pakistan (according to FAS USDA estimates) will harvest a record 31.4 million tons of wheat this year, which is 11% higher than last year’s harvest.

Tags: Ukraine, Russia, wheat, crop condition, crop forecast