Commodities Shuttle: After a 60% surge, wheat price drops in foreign markets

Wheat, which saw a 60% rise in prices after the start of the war in Eastern Europe, is starting to decline. The invasion of Ukraine by Russia caused an “overshooting” — when the price leaves the fundamentals and rises above what the market expected — says Rogério Trannin de Mello, commercial director of Coamo Agroindustrial Cooperativa.

“There was a hype on the highs, and the market made a technical correction,” he says. On the Kansas Stock Exchange (USA), the ton went from US$ 300, before the war, to up to US$ 480. Now it has returned to US$ 410.

After this stage of speculation and nervousness, the market will position itself more consistently, taking into account supply and demand.

Grounds for the rise exist. Ukraine is in the planting period, has difficulties finding inputs and taking the machines to the field. In addition, there is a blockage on sales, according to the director.

The Ukrainian government banned exports of wheat, barley, rye and other products until the end of the year. Importers will consume reserves, and then return to the market, says Trannin.

That is what Egypt, which has reserves for five months, and China, which has one of the largest stocks in the world, are doing. Brazilian mills have cereal for at least a month.

For the director of Coamo, the market should keep prices close to the current ones. If there are new highs, demand may not respond to these prices.

This Wednesday (9), the May wheat contract retreated to US$ 12.02 a bushel (27.2 kg) on ​​the Chicago Stock Exchange, after reaching US$ 12.94 on Monday. The day before the invasion, it was at $8.44.

The real market is quite different from the stock market, according to Trannin. The oscillations are not so abrupt, and price pass-throughs occur more slowly.

For him, there was a need for this technical correction to eliminate the excessive volatility of the sector. Now, the market will analyze where the demand for the cereal really is.

The USDA (United States Department of Agriculture) made, this Wednesday, the first estimates of reduction in wheat exports from Ukraine and Russia.

Ukrainians are expected to place 20 million tonnes on the foreign market, below the 24 million expected for the 2021/22 business year. The Russians will export 32 million, below the expected 35 million.

Ukraine’s foreign corn sales fall to 27.5 million tonnes, down from an estimated 33.5 million before the war.

It is good to remember that Usda is always very cautious in its market assessments, making adjustments little by little.

The 21/22 business year began in October last year and runs until September this year.

Sugar The production scenario in India improves, and the world deficit drops to 1.1 million tons in 2021/22. In the previous period, it was 3 million, according to consultancy StoneX.

At the Brazil Sugar production in the central-south region is expected to reach 34.5 million tons in the 2022/23 harvest, according to the consultancy.

In Brazil two The production of ethanol from sugarcane rises to 25.5 billion, up 5.6%, estimates Stonex. The volume of corn ethanol reaches 4.2 billion liters, an increase of 18.9%.