SASKATOON — The Black Sea region will be far less of a competitive threat in wheat markets in 2024-25, according to an agricultural markets research firm specializing in that region of the world.
SovEcon is forecasting Russia will export 46.1 million tonnes of the crop, down from 52.2 million tonnes in 2023-24.
Ukraine’s shipments are estimated at 13.6 million tonnes, down from 18.2 million tonnes.
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That is a combined drop of 10.7 million tonnes.
“The reduced grain export potential from Ukraine, coupled with expected smaller supplies from Russia, could support the global grain market,” said SovEcon managing director Andrey Sizov.
The market seems to be largely ignoring the reduced Black Sea competition in 2024-25.
Sizov believes current Chicago wheat futures prices are still way too low, tumbling to US$5.79 on June 27 after achieving a 2024 high of $7.20 on May 28.
“We are likely to revisit $7 in the new season,” he said in an email.
MarketsFarm analyst Bruce Burnett agrees that $7 is possible.
“I would concur with him that the fundamentals are there for that,” he said.
“The selloff in the futures has been significantly overdone.”
That goes for Minneapolis spring wheat futures as well.
Burnett said the market appears to be shrugging off the Black Sea woes and continues to trade off the narrative that there is still plenty of wheat around.
A 10.7 million tonne year-over-year drop in Black Sea exports should be raising more eyebrows.
“That is a big deal in the world market,” he said.
Things could get really interesting if Argentina has a poor harvest. Growers reduced their planted area in that country, and it has been dry and could be getting drier due to a rapidly advancing La Nina weather event.
As well, the adage that big crops get bigger and small crops get smaller could mean Russia’s crop could shrink even further, but Sizov doesn’t believe that’s true this time.
He believes Russia’s wheat crop may get bigger amid the recent weather improvement for winter wheat and a good outlook for spring wheat, which represents one-third of Russia’s total crop.
His advice to Canadian growers is to expect higher prices later in 2024-25 amid the tight global balance sheet.
“Demand (and premiums) for high-quality Canadian wheat could be higher than usual because of lower overall quality in the EU,” said Sizov.
“France and Germany were hit hard by heavy rain in recent months, and it’s very wet there while they need to start harvest.”
Burnett agrees with Sizov that wheat prices will likely appreciate once the Northern Hemisphere harvest dust settles, but he doesn’t think Canadian growers should count on handsome protein premiums.
The United States is harvesting what appears to be a very good hard red winter wheat crop.
“That will be a bit of a damping effect,” he said.
The only way premiums will take off is if Canada has some protein issues, which is a distinct possibility given the wet start to the year.
“This is not indicative of a high-quality year,” he said.
Growers need a stretch of hot and dry weather and good harvest conditions to boost protein levels.
Statistics Canada’s June survey shows Canadian farmers planted 18.94 million acres of spring wheat, a 2.8 percent drop from last year and 1.6 percent below its March estimate.
Burnett said it looks like higher yields will compensate for the lost acres, so there should be plenty of wheat for sale barring any weather disasters.
SovEcon’s new wheat production estimate for Russia is 80.7 million tonnes, down from its May forecast of 85.7 million tonnes.
Sizov said additional restrictions on Russia’s exports in 2024-25 are a distinct possibility due to the substantially smaller new crop and rising food price inflation.
That would have a bullish impact on wheat prices.
However, the start of truce negotiations between Russian and Ukraine in late 2024 is also a possibility, which would be bearish for prices.
“If we see a truce, it would have a limited impact on actual shipments, but the market will need time to realize that,” said Sizov.
sean.pratt@producer.com
