Russian Roulette

The grain and cereals markets around the world continue to dance to the tune of Ukrainian and Russian war news. It has not been uncommon in recent days to see the Liffe, Matif and Chicago futures markets moving first £20 one way, to then, immediately be followed by a £15 move in the opposite direction.

Most recently the bulk of this market reaction has been centred on news of Ukrainian grain shipments.

In recent news, Ukrainian Agriculture Minister Mykola Solskyi has reported that twenty million tonnes of grains and legumes as well as five million tonnes of oilseeds from the 2021 harvest cannot be exported, due to the blockade.

Ukraine is the leading exporter of sunflower oil as well as a major shipper of grains like barley, corn, and wheat. Since it is not possible to fill the vacuum by another global supplier, the results will reverberate globally, Solskyi said.

“This domino effect will cause catastrophic price increases, acute famines and starvation in food-insecure countries,” he said.

Also, Turkey and Russia are reportedly in talks to restart shipments of Ukraine’s agricultural products from Black Sea ports, without inviting the Ukrainians to take part in the talks. The Turkish government has offered to help clear mines off the coast of Odesa and escort grain ships. The Ukrainians are worried that removing the mines leaves them open to further Russian attack.

Whilst last weekend a Russian attack destroyed a grain terminal and warehouse elsewhere in southern Ukraine. Ukraine President Zelenskiy has said ‘The firmest guarantees will be weapons’ that will allow Ukraine to hit Russian ships if they attack Ukrainian ports.

It is difficult to believe anything quoted by the Kremlin given that 3 months since they stated they were not going to enter and attack Ukraine at all!

Domestically, the last month has seen both spot and November wheat prices fall nearly £40.00 per tonne. Falling consumption on the back of high prices, resulted in a lot of April bought wheat being rolled by the trade into May and the same has happened from May into June. Large amounts of wheat destined for Vivergo, is currently being delivered to local stores, as the UKs largest Ethanol plant continues to fail to run smoothly. This could yet have a knock-on effect on the space available for harvest 2022 grain. The Ensus ethanol plant at Middlesborough appears to have switched to using maize which has been trading substantially cheaper than wheat. Reportedly they have asked several trade suppliers to resell the June wheat destined for them and cash settle. This has put more wheat back onto the market.

Crops out on farm are coming into ear earlier than would usually be considered the norm and given a decent run of weather it would point to a slightly earlier than normal harvest start date.

The latest AHDB harvest estimates have put the UK 2022 wheat production at 14.95 million tonnes. This is 7% up on last years crop and 10% up on the 5-year average. The 14.95 AHDB estimate is still some way below most grain trade estimates which are looking nearer 16.0 million tonnes.

In summary, there is more old crop wheat left in the system than earlier predictions. Crop 2022 looks bigger and earlier to harvest than earlier predictions. Russian and Ukrainian grain may, or may not, imminently be back in the world marketplace.

Currently Yorkshire wheat is still tradeable at £300/tonne for this autumn.

Russian Roulette, a high stakes game of chance!