Wheat prices in Ukraine are rising due to exports and strong demand, but also limited domestic supplies.
Despite reports that Russian wheat exports were lower than expected, prices in the European Union continued to fall.
The high volume of grain exported from Ukraine is also likely to lead to an introduction of export restrictions on Russian grain.
Wheat prices on the EU market are under pressure because of increased exports to Ukraine.
Experts predict that the pressure on European wheat exports caused by Ukrainian exports will gradually ease.
Weather conditions in other regions, such as South America or the US, have improved crop prospects and added pressure to prices.
The Ukraine market is still insulated from these developments.
Conditions in the US, South America and Europe are favorable
Rains in recent weeks have helped improve the wheat crop condition across the US and South America.
Prices have dropped for the second week running in these regions.
The US is the world’s largest producer of wheat. The US has seen its wheat crop estimates increase due to rains in the country. This has led to lower prices and less concern about domestic shortages.
Chicago Board of Trade US Wheat Futures are down more than 8% from the beginning of October. Wheat futures at the time of this writing were 563.90cents, down by 1.5% compared to the previous close.
Brazil and Argentina have also experienced favorable weather conditions. The weather conditions are likely to keep the wheat prices in South America low in the coming months.
Demand from importers is strong
China, Egypt and the EU remain major wheat importers. These countries are heavily dependent on imported wheat to meet their domestic requirements.
Commerzbank AG says that Ukraine is supplying wheat to global markets at a rapid pace, which puts pressure on EU prices.
According to the Ukrainian Ministry of Agriculture almost 14,7 million tons of grain were exported between the beginning of the crop in July and November 4.
It is nearly 5 million tonnes more than the same period last year. 7,9 million tons of this was wheat, and 4.8 millions tons corn.
Ukraine grain harvests and exports
Ukraine exported grain in October at just over 4 million tons. This is almost 60% more than last year.
By the end October, 91% the grain acres in Ukraine were harvested.
The grain harvest was 48 million tonnes, with 22.3 millions tons of wheat and 18,3 million tons corn. The Ministry of Agriculture had forecast a wheat harvest slightly below the actual amount.
The total grain harvest is expected to reach 54 millions tons. Corn will likely make up the remainder.
The pressure on EU wheat prices will ease
Carsten Fritsch is a commodity analyst with Commerzbank AG.
It is expected that the pressure on European wheat exports caused by Ukrainian exports will gradually ease.
The Ukrainian government and agricultural associations have allocated 16,2 million tons for wheat exports during the entire crop season until June 2025.
Fritsch stated that nearly half of the 16,2 million tons wheat designated for exports has already been provided.
He added that this would likely ease the price pressure in Europe in the months to come.
Export demand will likely support the income of Ukrainian farmers.
FinSMEs reported that “this combination of strong demand for exports and limited supply is expected to support high prices on a short-term basis, giving farmers favourable sales conditions.”
Ukraine’s farmers face challenges
Ukrainian farmers are facing difficulties in producing wheat despite higher prices.
Despite the fact that the figures released by the Ministry of Agriculture indicate slightly higher crop yields for this year, operational issues may reduce the production of the staple.
The war against Russia is a major factor in the reduced efficiency of wheat growers.
FinSMEs reported in their report:
The war has caused damage to infrastructure, disrupted the planting and harvesting calendars, and made accessing key agricultural inputs like fuel and fertilizer difficult.
The report states that some regions of Ukraine manage their wheat production but the overall capacity is still lower than it was before the war.
Farmers are now facing higher production costs that could reduce profit margins, even if prices continue to rise.
The demand for Ukrainian agricultural products from China and western countries will continue to increase in the months to come.
The farmers’ ability to capitalize on these high prices depends on their ability and willingness to produce wheat continuously.
As we near 2025, the Middle East tensions as well as the Black Sea Corridor are crucial to the export and global markets.
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