Wheat and corn prices soar with Black Sea blockade – 07/20/2023 – Shuttle

The non-renewal by Russia of the agreement that allowed Ukraine to export grain through the Black Sea brings new concerns to the world’s food supply.

Accumulated on Tuesday (18) and Wednesday, wheat prices had an adjustment of 11.3% on the Chicago Stock Exchange. Corn rose 9.3%. Both cereals are on Ukraine’s export list.

The increase comes at a time when international food prices are falling. The FAO (Food and Agriculture Organization of the United Nations) Cereal Price Index for June indicates a retraction of 23.9% in the last 12 months.

Despite the importance of Ukraine and Russia in the world supply of cereals, prices should not take on the same proportions as in the first half of last year, after the Russian invasion of Ukrainian territory.

Global cereal production is on the rise and is expected to reach 2.8 billion tons in the 2023/24 harvest, up 1% over the previous year. Corn goes to 1.22 billion, and wheat, to 797 million.

The current drop in prices is due to greater world production and less pressure from imports, as many countries have already built up their inventories. Furthermore, the adverse climatic effects that occurred in previous years, including in Brazil, were not repeated with such seriousness.

The situation of Ukrainian producers, however, is getting worse. With no way out through the ports of the Black Sea, the flow has to be done overland or through the Danube River, with precarious infrastructure.

Costs rise, and prices fall, as Ukraine’s neighboring countries want to reduce purchases of Ukrainian products on their territories. The increased supply of Ukrainian cereals brings down prices for producers in neighboring countries.

The bill goes back to Ukrainian farmers, who are already experiencing high production costs and a drop in planting area, due to the Russian invasion. Ukraine’s wheat production, after reaching 33 million tons two seasons ago, is expected to fall to 17.5 million in 2023/24. Exports, which were 21 million in 2019/20, will fall to 10.5 million.

The war is also reducing the area of ​​other crops, such as sunflowers and maize. In 2021/22, corn production was 42 million tons. In the 2023/24 harvest, the Ukrainians should obtain only 25 million, and exports fall to 19 million tons, according to estimates by the USDA (United States Department of Agriculture).

The export corridor through the Black Sea, which is now suspended, was important for Ukrainians to place their grain production on the foreign market. 32.9 million tons of products were shipped in the period, according to UN data.

16.9 million tons of corn and 8.9 million tons of wheat left through this corridor. China was the biggest beneficiary, purchasing 8 million tons of cereals from Ukraine. Spain took 6 million, and Turkey, 3.2 million.

World stocks improve, due to the record harvests that have been taking place in several of the world’s main grain producers. Wheat represents 33% of annual world consumption; corn, 26%.

Brazil is well positioned in both cultures. The corn crop should be a record in 2022/23, reaching 126 million tons, a volume that could be even greater in the next one.

Wheat, after the 2022/23 record, has the potential for 11.5 million in 2023/24, according to StoneX consultancy.

Data from Conab (National Supply Company) indicate 10.5 million tons for both harvests.

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