Wheat prices have been under steady pressure in recent days as traders believe the Ukraine grain shipping corridor, which allows grain to be safely exported from Ukrainian ports and which is set to expire March 19, has a good chance to be extended. 

Freepik

Russia’s official said on Wednesday it would only agree to extend the Black Sea Grains Agreement only if it takes into account the interests of its own agricultural producers. The Black Sea Grains Initiative, brokered by the United Nations and Turkey last year, cannot be extended unless all parties agree. However, ahead of the deal, official Russia already expressed dissatisfaction with some aspects of the agreement.

Russia's agricultural exports have not been specifically targeted by Western sanctions, but Moscow said restrictions on its payments, logistics and insurance sectors posed obstacles to its exports of its own grain and fertilizers.

Elsewhere, overall factors for wheat crop expectations remain fair. The U.S. Department of Agriculture's National Agricultural Statistics Service in a weekly crop report on Monday rated 17% of the winter wheat in Kansas in good to excellent condition, down from 19% a week earlier. However, it was precisely wheat that led grains lower as the chief indicator of expectations for the Black Sea Grain Initiative, which is set to expire, as we mentioned above, on March 19, ignites a lot of uncertainly.

Wheat futures on the Chicago Board of Trade slumped to fresh 17-month lows Monday, falling below the $7 per bushel level. In its turn, CBOT wheat for May delivery (W_1) settled -1.8% to $6.95 ¾  per bushel, slipping below $7 for the first time since September 2021.

However, later on, failing to receive a pronounced confirmation of their hopes, traders made a U-turn and staged a mini-rally across the entire spectrum of the wheat’s nearest futures.

Yesterday, on March 7, wheat futures were mixed, as new concerns emerged, and the winter wheat gained traction. Chicago futures closed up by 4 ¾ to 5 ¾ cents. Spring wheat prices. However, remained in the red, with maximum drawdown at around 5 ¼ cents per bushel. 

Australia’s Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimated the wheat crop could be at 39.2 million metric tons (MMT), up from their 36.6 MMT prior estimate, establishing a new record output. Russia’s IFX reported 40 MMT of grain exports for the ongoing 2022/23 season. The full year forecast remains 55–60 MMT for all grain.

Summary:

Wheat became a wild card in the commodities’ grain group, as an outcome of the Ukraine grain shipping corridor, which allows grain to be safely exported from Ukrainian ports and which is set to expire March 19, remains a big unknown. Although optimism prevails, some experts say Russian officials may opt to stipulate additional requirements, including financially sensitive to integrity of sanctions, as a precondition to extend the deal. It’s important to know that the initiative cannot be extended unless all parties agree.

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