Thursday (3) is another high limit day for wheat prices on the Chicago Stock Exchange, with the market having to extend this limit to more than 100 points in the first contract – March/21 – in view of the current scenario of continuation of the war between Russia and Ukraine. In this way, the maturity reached over US$ 12.00 per bushel on the CBOT, testing US$ 12.21, with a high of 162.50 points. May and July were already over US$ 11.00 and September had US$ 10.30 per bushel.
Historically high prices are primarily a reflection of the worsening conflict between two of the main cereal producing and exporting nations. In addition, they also put the entire region on alert about the flow of the product, mainly through the Black Sea and Azov regions. These are the highest prices in 14 years.
In addition to the supply that leaves the market with both countries closed, experts also warn about the possibility that neither Russia nor Ukraine will be able to harvest their wheat fields that are already planted, which should further tighten global stocks of the grain. Thus, very aggressive supply deficits that had already been registered before the beginning of the war, demanding even more from other suppliers such as Argentina, Australia, the United States and European countries such as France. for example. The European Union, as a bloc, is, after all, the world’s largest producer of grain.
Against all this backdrop, Citigroup Inc. sees the continuity of a completely bullish horizon for wheat prices, which could still rise about 30%, reaching US$ 14.00 per bushel. And this week alone, grain futures are up more than 30%.
The war is “raising the potential of agricultural market prospects. Without a rapid and sustained reduction, we see this shock manifesting itself through several channels for crop prices”, said the international bank’s team of analysts in a note released this Thursday.
International analysts are also discussing the global dependence of wheat from the Black Sea region and how this flow might start to become more distributed among other sources. Even so, they reaffirm that it will be difficult to occupy the space that will be left, at least for now, of a combined offer from the two countries that will not reach the market.
Notícias Agrícolas listened to experts in the wheat market and brought their views not only for the current moment, but also for what may still happen in different perspectives.
Élcio Bento, analyst at Safras & Mercado
“The word is still uncertainty. The fundamental side of this, behind all this uncertainty, is the fact that it is a region that has a lot of wheat to export and the need to redirect this demand to some places”, explains market analyst Élcio Bento, from Safras & Mercado. “The first question that is not known is when this war will happen. And this factor, I can say as a market analyst, is something I’ve never seen”, he adds.
Still on the fundamentals, Bento also highlights the uncertainties – a term most used in recent days to define the current moment of the wheat market – about the crops of Russia and Ukraine this coming season. “If we have Russian production, will they be interested in selling to other countries? Will other countries want to buy Russian wheat?”, asks the expert.
He also recalls that the market, despite the uncontrolled and very intense highs, has not yet reached or broken the maximum that was US$ 12.75, reached in March 2008, in the commodities bubble. And whether the movement can gain even more strength or start to cool down will depend on the news that will continue to arrive from the war zone.
For all this reflection to reach prices in the Brazilian market, according to the analyst, two steps must be reached – in addition to the highs already observed in the North American market: advance in prices in the Argentine market – which are already starting to happen – and mills return to shopping.
“Everything you see in the international market has not yet been transferred to the market here in Brazil. We have already had nominal price indications with sellers asking R$ 2000.00 a ton. This is a record price, but there is no interest in buying. , is not being passed on to our market quickly because the mills are well supplied and the producer wants to wait for a higher price. So, the market is not moving, but nominally it is already rising”, he says.
Thus, Bento believes that there is still room for the Brazilian market to grow even more effectively.
Regarding the next Brazilian crop, the signs are of a good season, with the producer’s focus on wheat after his difficulties with soy and corn, especially in the south of the country. Thus, there are three main points of attention in this scenario: the weather for the new crop, the very high production costs already confirmed and the possibility that the war has already ended at the time of commercialization and international prices have plummeted.
Jonathan Pinheiro, Risk Management Consultant at StoneX
For Jonathan Pinheiro, Risk Management Consultant at StoneX, the uptrend is still very strong, prices at the ports also rise quite significantly and one of the highlights is the increase in wheat prices in Argentina, which was around US $85.00 per ton in the week, bringing the indicatives to $385.00. The increase in prices in the neighboring country also pulls prices in Brazil, as well as improves the competitiveness of the Brazilian cereal.
Still on Argentine wheat, Pinheiro says that of its exportable surplus of 14.5 million tons, about 97.5% of this volume is already sold, leaving little, therefore, still to be sold by one of the main supply alternatives at the moment. .
Grain prices in the Argentine market have been locked in recent months, while in other countries they have been rising. However, the worsening of the conflict made room for gains in the Argentine market, as well as intensified a search for origin. After its last crop was a record, the South American nation could release a greater volume of wheat, however, with the market still trying to balance its foreign sales with the needs of domestic demand. “And there they are also trying to control inflation.”
Alongside the Argentine issues, the consultant also highlights the entry of a new wheat crop in the middle of the year. “With the conflict still going on and the two countries out of the market, we could see some pressure on prices at first, but only occasionally. Afterwards, prices would rise again. China even signaled a reduction in its consumption. , but not enough to soften the scenario”, he explains.
In addition, Pinheiro also states that despite the war, there should not be an increase in global wheat consumption. “We do not believe in a rush of purchases, but a guarantee of purchases that were already planned”, he says.