Wheat marked a historic escalation and puts pressure on domestic prices

The international price of wheat lost 10% in a week with high volatility

The international price of wheat gave up 10.15%, which meant losses of more than US$40 in the Chicago market / File photo.

The international price of wheat gave up 10.15%, which meant losses of more than US$40 in the Chicago marketin a week marked by volatility due to the possibility of creating a “safe corridor” that facilitates the export of Ukrainian grains, paralyzed since the war with Russia began.

Although the one that felt the price volatility the most was wheat (it lost US$43.18, going from US$425.31 to US$382.13 a ton at the close of Friday on the US stock market), corn was also affected, which fell 6.46%; and soybeans, 2%.

The possibility of the creation of a “safe corridor” that makes it possible to export Ukrainian grains and by-products became the main bearish “driver”, since since the beginning of the Russian invasion, its ports were paralyzed and shipments were canceled and unable to be marketed.

As of Tuesday, this potential relief to world grain supply began to take shape, especially since Russia showed willingness to allow grains out and Turkey took a greater role as guarantor of control.

During the week, it became known that on June 8 the Russian Foreign Minister, Sergei Lavrov, will travel to Turkey to discuss the deployment of “safe corridors” for the transport of Ukrainian grain, according to his Turkish counterpart, Mevlüt Cavusoglu.

Russian Foreign Minister Sergi Lavrov travels to Turkey to discuss the deployment of safe corridors Photo AFP
Russian Foreign Minister Sergey Lavrov will travel to Turkey to discuss the deployment of “safe corridors” / Photo: AFP.

For Cavusoglu, the establishment of safe corridors for grain transport “is the most important issue” and, for this, they will seek to “create a corridor observation center in Istanbul,” said grain broker Granar.

In fact, this initiative was supported by the US government, who indicated their support for “the diplomatic efforts of our Turkish allies to end this war, mainly to reduce the violence and, at the same time, to find ways to facilitate the export including Ukrainian wheat,” State Department spokesman Ned Price said.

However, the chances of this happening will depend on the intentions of both Russia and Ukraine, and whether some requirements demanded by the parties are met, such as the Kremlin’s intention to lift some sanctions.

Many countries of the world are interested in the resumption of Ukrainian wheat exportsespecially African countries, whose food security is affected, due to their weight in world cereal trade.

In dialogue with Télam, the economist of the Rosario Stock Exchange (BCR), Guido D’Angelo, reviewed the importance of Ukraine in terms of grain exports.

Wheat represents 12% of world exports, while corn reaches 16% and sunflower oil 50%.

According to D’Angelo, it is estimated that in the Ukrainian ports on the Black Sea, none of them operational at the moment, there are 4.5 million tons of retained grain.

Likewise, he added, before the war began, Ukraine was expected to export some 24 million tons this year.

In wheat it represents 12 of world exports while in corn it reaches 16 and in sunflower oil 50 Photo file
In wheat it represents 12% of world exports, while in corn it reaches 16% and in sunflower oil 50% / Archive photo.

However, to date it has only shipped three million tons, of which 2.5 million were shipped prior to the war.

However, the BCR economist remarked that “this harvest has not yet started in the European country, but is about to. There are two key questions: the first is that losses of between 20% and 30% are being projected in the production”.

From an estimated production of 30 million at a time, we are going to have 20 milliontherefore it is unknown how much will be exported”, while the other falls on the state of the Ukrainian production and logistics infrastructure, he added.

This situation has repercussions in Argentina, especially in the interest of non-traditional markets for Argentine wheat, since exports of the last six months were a record in volume with 12.7 million tons dispatched for an amount of US$ 3,740 million, whose main destination was, precisely, African countries.

For his part, the director of the consulting firm Agritrend, Gustavo López, said that the market is “very sensitive to any type of news coming from Russia and Ukraine”, beyond the fact that the fundamentals that continue to weigh on the market are “a sustained demand and restricted supply” worldwide.

Regarding the actions of the market, López considered that “today we have to look more than anything at the medium term. From the structural point of view, the market continues to show that it is very healthy and that prices are correlated with time.”

“In fact, the futures did not fall that much, but rather the closest positions. But, in any case, there is a lot of volatility and it is time to cover positions,” he concluded.

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