Wheat Prices Surge as Kansas Faces Critical Crop Conditions and Ukraine Nears Export Potential
Wheat Prices Surge as Kansas Faces Critical Crop Conditions and Ukraine Nears Export Potential

Wheat Prices Surge as Kansas Faces Critical Crop Conditions and Ukraine Nears Export Potential

  • 19-May-2023 1:38 PM
  • Journalist: Harold Finch

US: Wheat quotations on global exchanges experienced a decline of 1.1-4% after initially growing by 2-4% earlier in the week. This drop was mainly due to the announcement of the extension of the grain corridor for another 60 days. However, this factor is mostly speculative since Ukraine has nearly reached its Wheat export potential this season.

According to the latest crop tour in Kansas, the condition of the crops is critical which could result in a surge in prices. This confirmation could cause another jump in prices for Wheat, particularly for hard winter HRW Wheat in Chicago. Currently, the prices for HRW Wheat are already 41% or nearly $100/t more than soft winter SRW Wheat.

Kansas, the leading Wheat producer in the USA, is expected to have its lowest yield since 2003. The estimated yield stands at 2 t/ha, a decline from last year's 2.7 t/ha and an average of 3.1 t/ha over the past five years. Northern and central Kansas was hit harder than anticipated by winter cold, resulting in significant losses in the Wheat crop. Consequently, some of the crops will be harvested for hay, while in fields where the ear is positioned too low, threshing could prove impossible.

According to the USDA forecast, Ukraine has successfully exported 15 million tons of Wheat so far this season. However, there is potential for an additional 1-1.5 million tons to be shipped by the end of the season, provided that the Russian Federation doesn't hinder vessel inspections for loading in Black Sea ports.

Last week, the Russian Federation decreased Wheat exports from ports to 0.68 million tons, marking the lowest export figure since February. Consequently, the forecast for Wheat exports in May was lowered to 3.8 million tons, down from 4.3 million tons in April. This amount is significantly higher than the long-term average for May, which is 1.5 million tons. It is estimated that the Wheat exports from the Russian Federation in 2022/23 MY will reach 44.4 million tons.

Argentina is set to experience a significant increase in Wheat production, with estimates indicating a 40% growth to reach 18 million tons by 2023/24. Meanwhile, the main Wheat-growing regions of the United States are expected to encounter warm weather without any precipitation in the next 7-10 days. This unfavourable weather condition is expected to further diminish the potential of the harvest.

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