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Why wheat prices have fallen to their lowest since 2020 despite Russia-Ukraine grain deal's lapse

By Myra P. Saefong

USDA raises 2023/2024 crop year wheat export forecasts for Russia and Ukraine

Soft red winter wheat prices have fallen to their lowest since late 2020, on ample global supplies, despite the lapse of the Black Sea Grain Initiative, which was meant to keep global markets supplied with food in the wake of the Russia-Ukraine war.

Russia suspended its participation in the deal and allowed it to expire in July, sparking worries about risks to global grain and fertilizer supplies as the war between Russia and Ukraine that began in February 2022 drags on. Russia and Ukraine are among the world's largest grains exporters.

Prices for wheat, in particular, had rallied shortly after the news of the deal's suspension, but have since fallen back sharply in recent days.

In Tuesday dealings, the December soft red winter wheat contract was up 4 1/4 cents, or 0.7%, at $5.88 3/4 a bushel in Chicago. It traded as low as $5.70, the lowest intraday level for a most-active contract since Dec. 9, 2020, according to Dow Jones Market Data.

The suspension of the deal hasn't affected the overall global supply of wheat, Sal Gilbertie, chief investment officer at Teucrium Trading, told MarketWatch.

Russia has plenty of wheat and is exporting at a record or near-record pace, "depending upon which weekly data you look at," he said. So there's "plenty of wheat in the world and plenty of availability, just not from Ukraine any longer, in affordable bulk shipments."

Ukraine is managing to continue exports, but the "process is slow and cumbersome," Gilbertie said, while Russia, Australia, Canada, the U.S., Romania, France and others are supplying wheat to buyers, with "no current supply issues."

Data from the U.S. Department of Agriculture's World Agricultural Supply and Demand Estimates report released Tuesday show expectations for 2023/2024 crop year exports of 49 million metric tons of wheat from Russia. That's up from last month's report, which forecast exports of 48 million. The USDA expects Ukraine to export 11 million metric tons in the 2023/2024 crop year, up from the August projection of 10.5 million.

The USDA forecast 2023/2024 world wheat ending stocks of 258.61 million metric tons, a bit lower than the 265.61 million projected in the August report.

Overall, "the USDA is confirming expectations for ample global supplies of grains in the [2023/2024] crop year," said Gilbertie.

"At this point, markets will focus on actual harvest yields to see if the immense variability of production from field-to-field in many parts of the country will translate into market moving adjustments in future WASDE reports," he said.

-Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


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09-12-23 1424ET

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