Wheat prices in Ukraine have been rising on robust demand and exports, while limited domestic supply also adds to the bullishness.
Prices in the European Union market, however, continued to slip despite reports of lower-than-expected Russian wheat exports.
An introduction of export restrictions for grain from Russia is likely also due to the high exports from Ukraine.
Wheat prices in the EU market have been under pressure due to increased exports from Ukraine.
Experts believe that pressure on European wheat prices resulting from Ukrainian exports is likely to gradually ease.
In other regions such as South America and the US favourable weather conditions have boosted crop prospects, which added further pressure to prices.
However, the Ukraine market remains insulated from the above developments.
Favourable conditions in the US and South America
In recent weeks, rains across the US and South America have improved the condition of wheat crops in the region.
This has led to a drop in prices for a second consecutive week in those regions.
The US is one of the largest wheat producers in the world. Rains across the country have seen its crop estimates rise, alleviating concerns of domestic shortages and leading to a fall in prices.
On the Chicago Board of Trade, US wheat futures have slipped more than 8% since the start of October. At the time of writing, wheat futures were 563.90 cents, down 1.5% from the previous close.
Additionally, Brazil and Argentina, two top South American wheat producing countries have experienced favourable weather conditions. This is likely to keep wheat prices in the region subdued in the coming months.
Strong demand from importing countries
The EU, China and Egypt remain major wheat importing countries. These countries rely heavily on imports for their domestic needs.
Ukraine has been supplying wheat in global markets relentlessly, which is adding pressure to EU prices, according to Commerzbank AG.
According to the Ukrainian Ministry of Agriculture, almost 14.7 million tons of grain have been exported from the start of the crop year in July up to November 4.
This is almost 5 million tons more than at the same time last year. Of this, 7.9 million tons were wheat and 4.8 million tons were corn.
Ukraine grain exports and harvests
In October alone, Ukraine’s grain exports were just under 4 million tons, almost 60% higher than the previous year’s level.
By the end of October, 91% of the grain acreage in Ukraine had been harvested.
This resulted in a grain harvest of 48 million tons, including 22.3 million tons of wheat and 18.3 million tons of corn. The wheat harvest is thus slightly above the forecast of the Ministry of Agriculture.
The grain harvest as a whole is expected to reach 54 million tons, with the remaining amount likely to be corn.
Pressure on EU wheat prices to ease
Carsten Fritsch, commodity analyst at Commerzbank AG, said:
The pressure on European wheat prices resulting from Ukrainian exports is likely to gradually ease.
Ukraine’s government and farming associations have earmarked 16.2 million tons of wheat for exports for the entire crop year until June 2025.
Fritsch said that almost half of the 16.2 million tons of wheat earmarked for exports have already been supplied.
This is likely to ease the pressure on prices in the European market in the coming months, he added.
As for Ukraine’s farmers, robust export demand is likely to support their incomes as well.
“This combination of strong export demand and limited availability is expected to continue supporting high prices in the short term, providing farmers with favourable conditions for sales,” FinSMEs said in a report.
Challenges for Ukraine farmers
Despite higher prices in the country, Ukrainian farmers have been facing challenges in terms of production of wheat.
Even though figures from the agricultural ministry indicate a slightly higher crop harvests this year, operating issues could reduce production of the staple grain.
The ongoing war with Russia has played a significant role in reducing the efficiency of wheat farmers.
FinSMEs said in the report:
The war has damaged infrastructure, disrupted planting and harvesting schedules, and made it difficult to access key agricultural inputs such as fertilizers and fuel.
According to the report, some regions in Ukraine are managing their wheat production, but overall capacity remains lower than pre-war levels.
As a result, farmers are dealing with higher production costs, which could erode profit margins even as prices remain elevated.
In the coming months, Ukrainian farmers will continue to see higher prices due to demand from western countries and China.
However, their ability to capitalise on these high prices will depend on whether the farmers could produce wheat uninterruptedly.
Additionally, the Middle East tensions and the Black Sea Corridor will be crucial for export and global market conditions as we approach 2025.
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