What a week for Chicago wheat futures, the now expired March contract starting the week at 1425.25c/bu (AUD$709.98) and falling to 1073.75c/bu (AUD$535.61) on Thursday and then finally finding, hopefully, a floor and rallying 16.25c/bu (AUD$8.10) last night.
Although the Dec22 slot was not as volatile it too did see some spectacular swings. Closing on Monday at 1048.75c/bu (AUD$522.42) after a rally of 68.75c/bu (AUD$34.29) from the previous Friday’s close. The next few days got a little rocky with the Dec22 closing at 977c/bu (AUD$487.34) on Thursday. With the Dec22 showing 1014c/bu (AUD$505.80) last night, an overnight rally of 37c/bu (AUD$18.45) there is confidence this market may have at least found a short term base. But that is not a given, as you might expect during these times.
With Ukraine taking steps to export through Poland it may take a week or so to figure out what can be moved and how much of that can be moved and if that product is still competitive once it is moved. I’m not sure what road rates are like from Ukraine to the port or upcountry mills in Europe but with these fuel prices sky rocking worldwide one would think this is more of a token gesture than an actual attempt to reduce ending stocks at a significant pace.
Some analyst expect to see around 600kt per month cap this route out, that compares to their usual 5mt per month, so potentially about 10% of usual export pace. Ukraine president Zelensky has stated that he expects most producers to plant spring crops with little land to fallow through. Producers, like himself, do not know what is in store for the longer term, so will concentrate on short term returns. This may, if they can actually produce anything due to fertilizer, frieght and other issues, see a significant spike in ending stocks of summer grains like sunflower or corn. But on the flip side may also take next year’s winter cereal acres out of action to some degree, possibly helping to sustain longer term wheat prices at higher levels and countering the potentially much larger carry in to some degree, hard to know which way to grab that knife. Will Germany / Poland buy cheap Ukraine wheat to export ?