51 Story Idea? Email Paul.Nolan@Farms.com Better Farming | November/December 2023 Moe’s Market Minute What a year the wheat market is having, with a lot of volatility and largely depressed prices despite the United States and Canadian wheat crops facing adversities. Will this trend continue in 2024? In a “normal” global wheat market, like what we had before Russia invaded Ukraine in February 2022, weather worries in the U.S. and/or Canada and its likely hit on the wheat crop would have been reason enough to support wheat futures. But following the Russian invasion of Ukraine, the norm has gone out of the window. In the earlier part of this year, the continuous year-on-year (Y/Y) drought in the hard red winter (HRW) wheat regions of the U.S., primarily Kansas and the adjoining states, hurt the HRW wheat crop. It however was offset by a larger than expected U.S. Midwest soft red winter (SRW) wheat crop. This year’s U.S. spring wheat crop was plagued by hot and dry growing conditions in many regions during the summer. The 2023 Canadian spring wheat crop too was met with drought. While 2021 was a bad drought year for the Canadian Prairies, 2022 cropping conditions recovered for the Western Canadian crops. On the back of that though, 2023 turned out to be another hot and dry year on the Canadian Prairies that saw soil moisture levels drop off the cliff. The 2023 Canadian all-wheat was pegged by Statistics Canada in their September update at 29.84 million metric tons (MMT), which is 13 per cent lower Y/Y and five per cent lower than the five-year average. Spring wheat production alone is estimated at 22.64 MMT, which is lower by 12 per cent Y/Y. Following the Russian invasion of Ukraine, the Black Sea grain deal was agreed upon by Russia, Ukraine and the United Nations in July 2022. This allowed exports of Ukraine grains from the ports of Ukraine. But in July 2023, Russia pulled out of that deal and Ukraine lost its critical shipping avenue for transporting their grains. They were left to rely on on-ground movement of grains through trucks and rail to export their surplus. This also faced issues due to some neighbouring European countries objecting to Ukrainian grains being exported through their countries due to concerns of flooded supplies and lower prices. This tightening of global wheat supply was expected to support wheat futures, but Russia had other plans. In essence, Ukraine’s loss worked in Russia’s favour as their wheat exports ballooned. Russia was already the biggest global wheat exporting nation. According to the U.S. Department of Agriculture’s (USDA) monthly crop report in September, Russia’s 20232024 wheat production is estimated to be 85 MMT and exports at 49 MMT (which would be a record high). This compares to the prior year’s figures of 92 MMT (which was a record high production) and 46 MMT respectively. In the five years prior to the invasion of Ukraine, Russia was producing about 72 MMT to 85 MMT of wheat and exporting 33 MMT to 41.5 MMT of their supply. Some private estimates of Russia’s export potential this year are even higher than USDA’s. 2023 GLOBAL WHEAT MARKET CONUNDRUM Russia's war, drought conditions continue to plague commodity markets. By Moe Agostino & Abhinesh Gopal Hot and dry growing conditions in 2023 led to average wheat production at best. JosieN/iStock/Getty Images Plus photo
RkJQdWJsaXNoZXIy NTc0MDI3