Wheat prices on the Chicago Stock Exchange have risen to their highest levels in the past year. This may reflect fears of a new wave of international sanctions against Russia, for which wheat is the main Black Sea grain export. Meanwhile, the price of Ukraine’s main export, maize, remains relatively stable, the Kommersant newspaper writes.
The July contract in electronic trading in Chicago rose by 3.4% to USD 7.405 per bushel (USD 272.06 per ton) - the highest since March 2013 - on Monday, May 5. Wheat prices in Chicago corrected later in the day, with the margin of increase falling to 2.2%.
Russian and Ukrainian export grains compete in this region. According to the Ukrainian Ministry of Agriculture, about 6 million tons of wheat and 7.2 million ton of maize (Ukraine is among the three largest exporters of maize) were exported from Ukraine in the past agricultural year. During the same period, the Russian Federation exported 11 million tons of wheat and 2 million tons of maize. Wheat and barley accounted for 85% of Russia’s grain exports while maize accounted for only 15%. Maize accounted for 65-75% of Ukraine’s grain exports, barley accounted for 15%, and wheat 20%.
Western grain traders (Cargill, Glencore, Louis Dreyfus) accounts for more than a more than one-third of Russia’s Black Sea grain exports, Ukrainian-based Kernel accounts for 10%, and the state-owned United Grain Company (the state owns a 50% plus 1 share in the company and the Suma group owns the remainder) accounts for 4%.
Analysts with the Institute for Agricultural Market Studies (IKAR) expect the price of maize in Novorossiysk to fall by 7% as newly harvested grain arrives on the market, which happens every year.
Increasing demand for grain may also exert pressure on the market. According to the International Grains Council, global consumption of wheat increases by 10-15 million tons annually, and it will reach 691 million tons in 2013/2014, compared with 675 million tons a year earlier. According to forecasts by the International Grains Council, world production will total 709 million tons in the current agricultural year and reduce to 697 million tons next year while consumption will rise to 700 million tons - this will essentially mean a shortage on the world grain market. A similar trend is taking shape on the maize market: the council is forecasting that world consumption will reach 935 million while production will total 965 million tons in the 2013/2014 agricultural year. Production will exceed consumption by only 5 million tons the following year.