Corridor of life

30 September 202210 min reading

Most people out there don’t seem to understand that the food that isn’t being grown in 2022 won’t be on our store shelves in 2023. We are potentially facing an absolutely unprecedented worldwide food crisis next year, but the vast majority of the population doesn’t seem very alarmed about this. Sharp crop reduction looks scary when we compare it YoY or “to the 190X” but we have to keep in mind higher population – then it looks even worse. This means the world needs Ukrainian grain and grain exports have to be extended.

Elena Faige Neroba
Business Development Manager

A broad sell-off in commodity and equity markets, tied to the high inflation, rising interest rates and an economic downturn that would dent demand, dragged down a broad set of other commodities. But still, Russian moves to mobilize more troops and illegal referendums on joining Russia in occupied regions of Ukraine fuelled concern about further disruption to the vital Black Sea grain trade. Dry weather in Argentina and the U.S. also supported prices. 

There are some rumors about the prolongation of the Grain Corridor Agreement and misunderstanding in part of the deadline of passage, but UN WFP bought few more vessels for October-November, so they are sure the agreement will be extended. After new rules of fumigation were announced by the Ukrainian government, lots of vessels were stuck in Istanbul which could lead to lower shipping in the last week of September. As of September 27, 231 vessels with 5,3MMT of food including the biggest capsize grain vessel Marant Excellence -115kMT. have passed via the grain corridor. Presents of Ukrainian grains and by-products don’t allow prices to rise sharply. Only 30% of wheat directed to EU countries, rest 70% of Ukrainian wheat which shipped via the corridor sold to Africa, the Middle East and Asia countries to prevent famine. 

The wheat complex, after surged on the Black Sea conflict’s escalations, pulled back, posting more than 3% drops into the weekend. News of Russia’s bumper crop had pushed markets lower early in the week. Market awaiting a decision about terms of grain corridor prolongation.

The IGC raised its forecast for 2022/23 global wheat production, mainly reflecting an upward revision for the crop in Russia. It pegged global wheat production at 792Mt in 2022/23, up from a previous projection of 778 million and now above the prior season’s 782Mt. Russia is now expected to produce 93.4Mt, up from a previous forecast of 87.6Mt. Russia’s wheat exports in the 2022/23 season were still seen at 36.5 MMT, despite the higher production forecast, leading to an expected build-up in stocks in the country. Stocks of wheat in Russia at the end of the 2022/23 season were projected at 22.5 MMT, almost double the prior season’s level of 11.3 MMT. Sovecon raised its forecast for Russia’s 2022 wheat crop to 100MMT from 94.7 due to high yields of spring wheat. 

Russian wheat exports are picking up after it has regained its competitive edge. Should see 1+mmt this week for the first time in many months. September volume is however estimated at 4.3 MMT, not bad, but still below the average 4.6 MMT. In this context, as of September 28, the export duty on wheat will decrease to 2,476.6 from 2,668.3 rubles per ton a week earlier. MARS expected the Russian crop at 95MMT.

According to the sources, in fact, the total military mobilization of the agrarian sector of Russia will already feel a significant shortage of labor in the form of drivers, agronomists and agricultural machinery operators by spring. Market rumoring about serious lack of storage capacities in Russia due to reduced export pace and solid stocks of last year. Some analysts say wheat ending stocks 22/23 could be up to 20 MMT. It causes massive loses for farmers.

From Ukraine, Ukraine’s 2023 wheat crop may decrease from 16MMT to 18MMT, down from 19.5MMT this year due to an expected fall in the winter wheat sowing area. Lack of finance can lead to lower input usage which remains to poor yields and quality. Ukrainian officials have said the area under winter wheat could fall by at least 20% due to the Russian occupation of some areas of the country as farmers prefer to sow oilseeds that have stable export demand.

Meantime, recent rains in southern Ukrainian regions have improved conditions for continuing winter grain sowing, the state weather forecasting center said. It said in a report that soil moisture in mid-September is among the most significant in Ukraine over the past 10 years.

As for the Canadian Saskatchewan harvest, as seen on September 19, many producers experienced cool, damp weather this past week which halted or slowed their harvest operations until conditions improved. Other producers that were able to continue either finished their harvest or are very close to doing so. Precipitation was generally welcomed after several weeks of dry weather. Concerns about field and equipment fires have eased and there is hope that the rain will be enough in some areas to allow pastures a little regrowth. Steady rainfall across Manitoba late last week stalled harvest progress. Farmers are anxiously awaiting drier weather to return to straight-cutting cereal and canola crops, and for breezy days to dry down damp swaths. Seeding fall rye and winter wheat has started, primarily on canola stubble. Seedbed conditions are good, and recent rains will rapidly germinate planted crops.

Brazilian wheat production should total 10.935 MMT in 2022 as four states are likely to increase output in what will be a record season for local farmers, according to agribusiness consultancy Safras & Mercado. The new estimate represents an increase from the 10.5 MMT previously expected. If projections are confirmed, Brazil’s wheat production this year will be 41.2% higher than the 7.745 MMT in 2021, which was already a record, Safras said. Thanks to the development of new wheat varieties, Brazilian farmers are able to cultivate wheat plants adapted to tropical conditions.

BCR forecast the 2022/2023 wheat harvest at 16.5 MMT, down from 17.7 MMT before. World Grain reported that wheat rated “regular-to-bad” went from 18% to 34% last month, a market analyst updated the rating to 42% poor to very poor on 27th September.

Worrying economic indicators in Europe have in fact plunged the European currency. In the Eurozone, inflation was a record 9.1% in August due to higher energy and food prices. The European Union’s statistics agency reported that bread prices in August 2022 were 18% higher than a year ago, the highest rise since December 2017. Eurostat said prices rose the most in Hungary, which reported a 66% increase in price, and Lithuania recorded a 33% increase. The combined cost of bread and cereals rose 16.6%, the highest rate since January 1997. Meantime, non-commercial market participants expanded their net long position in Euronext’s milling wheat futures and options in the week to Sept. 16, data published by Euronext showed.

Chicago-based agricultural brokerage Allendale has published its own estimates for US 22/23 wheat production and pegged them at 1.787 billion bushels (48.63 million mt), which is up marginally from the 1.783 billion bushels (48.52 million mt) projected in the USDA’s. And we see strong demand from SA, Pakistan, and MENA with quality and logistics problems in part of traditional origins. 

US corn sales for the 22/23 marketing year have gotten off to a slow start, with shipped and unshipped sales just 22% of the current USDA forecast vs. the 30% average pace for the second week in the new MY. Outstanding sales are just half of what they were for the same period last year.

The IGC downwardly revised its 2022/23 world corn crop outlook by 11 MMT to 1.168 billion tonnes, mainly driven by a cut in its forecast for U.S. production to 354.2 MMT from 364.7 MMT. EIA data showed ethanol production falling 62,000 barrels per day to 901,000 bdp, the smallest implied corn use for that purpose since February 2021. Stocks, however, dropped 342,000 barrels to 22.501 million barrels. Outlooks for clear Midwest weather added to bearish sentiment, even though the U.S. Department of Agriculture has projected smaller U.S. corn and soy crops compared to a year ago. The harvest is just beginning in the heart of the Corn Belt, with 7% of the U.S. corn crop and 3% of the U.S. soybean crop cut as of Sept. 18. Monday’s Crop Progress report indicated 40% of the nation’s corn crop was mature, still 5% points behind the average pace. As for crop conditions, NASS showed a 52% good/ex rating, down 1% on the week. 

Argentina’s Rosario grains exchange cut its production forecasts for the country’s corn and wheat crops as a prolonged drought impacts the major grains-producing country. In the exchange’s monthly report, indeed, it estimated corn production from the 2022/2023 harvest to reach 56 MMT, below the previous estimate of 58 MMT. BAGE reported that 22/23 Argentine corn planting has started. As of Sept. 21, 3% of the area had been seeded, down by 5.5 pp against the same week last year and around 8pp lower than 5Y avg. lack of soil moisture slowed corn planting, as did low temperatures. Argentinian MinAgri released its estimate for the Argentinian corn planting area, projecting 10.4 million ha for 22/23, down from the 10.6 estimated in the August report. According to the ministry, area sown may continue to decrease if there is no rain to allow for planting work. As of Sept 22, 7% of the area had been planted against 11% YoY. Planting is being carried out slowly due to unfavorable conditions of soil moisture and weather temperature.
FranceAgriMer said French farmers had harvested 26% of this year’s grain corn crop by Sept. 19. That is compared with 14% a week earlier and with a 1% harvest progress by the same week last year. An estimated 43% of corn crops were in good or excellent condition last week, unchanged from the previous week. That is the lowest in FranceAgriMer data going back to 2011. Corn crops were running 22 days ahead of the growth pace of last year and 12 days ahead of the five-year average, FranceAgriMer said.

Michael Snyder via The Economic Collapse blog says that things are far worse than we are being told.  Over the past few months, we have been carefully documenting facts that show that global food production is going to be way down in 2022. Unfortunately, most people out there don’t seem to understand that the food that isn’t being grown in 2022 won’t be on our store shelves in 2023. We are potentially facing an absolutely unprecedented worldwide food crisis next year, but the vast majority of the population doesn’t seem very alarmed about this. Sharp crop reduction looks scary when we compare it YoY or “to the 190X” but we have to keep in mind higher population – then it looks even worse. This means the world needs Ukrainian grain and grain exports have to be extended.

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