Size does not matter

04 September 20235 min reading
Wheat harvesting in Northern Hemisphere going to the end. With unusual stocks in Russia, partly stolen from Ukraine, we do not worrying about quantity, but quality. Domestical price for milling wheat  in Ukraine already rising adding few dollars per tonne weekly. Is this the Ukrainian problem only? 

Flour mills in Ukraine raise prices due to the lack of quality grain offers from the new crop wheat. For their part, farmers continue to restrain the sale of high-quality grain, which provides additional support to prices. The majority of processors noted that mainly offers of grain with a low protein content - up to 11%. Some millers predict that in particular regions of Ukraine where it could be accrued due to the weather impact, but for Ukraine in general upcoming 2023/24 season could be the most difficult in a second raw: the total share of good quality milling wheat may not exceed 10% of the total production, and if we include low-pro milling wheat it could be around 20-30% from total production.

According to experts, among which are SGS and biggest Ukrainian millers, such a situation rarely happens in Ukraine, the last one was two decades ago. According to several indicators, important for export and domestic milling, the grain quality is worse than last year. But the main problem this year is low protein partly because of low fertilizers usage but mostly because of low prices compared to cost of production and unstable exports steam. 

In the interim wheat quality map Ukrainian SGS had discovered that 12.5 pro wheat share decrease for the last few seasons: in 2020 it reached 10% from total crop, in  2021 - just 3%, in 2022 - 1% and could not exceed 0.8-1MMT in 2023. We need to keep in mind that Ukraine needs at least 3.5MMT of all-quality milling wheat annually.
Are there possible problems for Ukrainian flour industry? It is impossible to say unequivocally what the minimum quality of wheat can be used to make high-quality flour. Processors form flour batches from different grains, selecting the optimal protein and gluten indicators. It also depends on the equipment on a particular mill. Anyway, considering the quality of wheat, this year may be difficult for flour millers.

The last time Ukraine imported flour wheat was in the 2003/2004 marketing season, when its own crops were winterkilled and Ukrainian millers decided to import grain from Kazakhstan. 

As per SGS’s interim wheat quality map 28% of the crop will go to non-standard wheat only because of fungus, foreign substances etc. Test weights and falling numbers are among common measures of milling quality, along with protein content. Wheat that does not meet milling standards can be sold for livestock feed.

Such quality distribution is unusual for Ukraine. Last year 11.5 pro wheat exceed 55% from total crop, while in 23/24 it could be 30-40% less. But Ukraine is not along with quality problems. Rain delays to the end of the soft wheat harvest in France may affect milling quality, though crop gathered before the wet spell was generally showing satisfactory readings, farm office FranceAgriMer said on late August. Frequent showers and cool temperatures since late July in northern France and a swathe of northern Europe have raised concern about quality loss. That has added to doubts about global milling wheat supply as war in Ukraine threatens Black Sea trade and drought hurts North American crops, Agricensus noted. In France weather issues have hindered harvesting in the northwest which can affect test weights and will require monitoring of other parameters. Soft wheat harvested before the prolonged rainy spell was showing satisfactory falling numbers and protein content, with average protein estimated at around 11.5%, but test weights in the earlier-harvested crop were also varied and some sorting was expected by grain handlers to improve readings.

The German Federal Ministry of Food and Agriculture expects that winter wheat, which makes up 46% of the total grain area, saw a slight decrease in cultivation area to 2.81 million ha, down 2.7% from last year. The average yield for winter wheat is also down 3.4% year on year, and production is expected 5% below the six-year average. Total wheat production in Germany for 23/24 is expected down by 1.44MMT from the previous year. German Deutschen Raiffeisenverband association estimate was also lowered by 5% from 2022’s crop.Wheat quality had been affected by the cool and humid conditions during the last third of July and the several-week harvest interruptions due to rainfall. Wheat samples analyzed to date show a protein content of 11.7%, while 22/23 average was 11.9%. Agrisensus noted that as most of the samples analyzed were collected before the harvest interruption, so final results could show a lower quality.

Russia even with their enormous stocks will not be able to cover this gap in demand as they mostly use wheat as a weapon and manipulate market. GASC tender on August 30 already shows us that market is worrying about future wheat year. So, size does not matter. 

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