Wheat Ending Stocks Lowest Since 2012/2013

Last week, in its March Wheat Outlook report, the USDA’s Economic Research Service (ERS) stated that, “Wheat prices are surging globally in the wake of the conflict between Russia and Ukraine.

Prior to this development, prices were already elevated, influenced by relatively tight supplies in key exporting countries. Major exporter ending stocks (Argentina, Australia, Canada, the European Union, Kazakhstan, Russia, Ukraine, and the United States) are collectively projected as the lowest since 2012/13. Prices are surging even higher as the conflict is raising significant questions about the ability of Russia and Ukraine to continue exporting.

With global wheat prices historically elevated and volatile, it is expected that importers will ration demand by at least delaying some purchases. But the main question is the values of the countries’ strategic food reserves, which greatly vary. It is also possible that some importers may eventually turn to U.S. wheat when other exporters lack sufficient supplies. However, the current large price premium for U.S. wheat over other key competitors reduces the chances of a significant global shift towards U.S. wheat in the near-term. Weighing these factors, U.S. exports have been lowered 10 million bushels to 800 million this month, which would be the lowest U.S. exports since 2015/16.

We already wrote some time ago that Russia and Ukraine are responsible for nearly 30% of world’s wheat imports combined. Ever since this dire situation is only getting worse. The Chicago CME May wheat futures price peaked at almost $US13 per bushel, but it had come back in recent days. What adds fuel to the fire is yesterday’s Russian Ministry of Agriculture’s draft of a government decree, which together with the Ministry of Industry and Trade promotes a temporary ban on the export of basic grain crops from Russia from March 15 to June 30 citing their strive to protect the domestic food market. This is not the first such action by the country’s government.