Despite the ongoing conflict in Ukraine, the last few weeks in grain markets almost felt like we had returned to the good old days when we wrote about weather forecasts and crop conditions rather than pandemics, politics and Putin. It wasn't to last.
Subscribe now for unlimited access to all our agricultural news
across the nation
or signup to continue reading
Futures markets had been gathering some momentum behind a picture of deteriorating conditions across the Canadian Prairies and the US Plains, but the wildcard in the deck was the looming deadline to extend the Black Sea grain export initiative.
The market had largely priced in the fact Russia would reject any extension to the agreement, and so last week's initial reaction to news the deal was off was relatively ho-hum.
However, Russia's decision to punctuate the announcement with missiles and drone attacks on key Ukraine grain export terminals provided the impetus for a much more spirited rally, and markets have bounced around wildly since.
Had it endured, July 22 would have marked the one-year anniversary of the opening of the Black Sea grain export corridor, which has provided a critical avenue for the movement of grain from Ukraine to the global market.
The situation in the Black Sea has attracted most of the attention in recent days, but there are other influences the market will be watching closely.
- James Urquhart, AWB Cargill
While the deal has seen the shipment of nearly 33 million tonnes of product out of Ukraine, in recent weeks, the impact of the initiative has been in decline as Russian officials, frustrated at Western sanctions and complaining of a raw deal, slowed vessel inspections and significantly reduced the number of vessels leaving Ukraine's Black Sea ports.
Last week's attacks on Black Sea export infrastructure and subsequent threats of military action towards grain vessels by both sides of the border would appear to have dashed any hopes of continuing the export task via the Black Sea without Russia's endorsement.
Ukraine remains a key input to solving the global wheat supply and demand equation, and so the market now takes stock of the capacity and costs of exportation via alternative supply routes.
Barges via the Danube to the Romanian port of Constanta have played a large role in the solution to this point, as have the overland options of trains and trucks.
The situation in the Black Sea has attracted most of the attention in recent days, but there are other influences the market will be watching closely.
India's move to ban non-basmati white rice exports and progress of the burgeoning EU harvest are going to influence price action from here. If nothing else, expect volatility, rallying on headlines and retreating on bouts of profit-taking.
While on paper, global wheat supplies are ample, any impediments to supply or logistics place greater pressure on production in key supply regions, so one eye will remain firmly on those weather forecasts and crop conditions.
