Black Sea, Canadian wheat prices surge on weather, crop fears

Wheat prices in the Black Sea and Canada have reached their highest levels in months as adverse weather and crop reductions have been observed in the Black Sea region in recent weeks.

Cold weather followed by frosts in Russia since early May has severely damaged wheat crops, resulting in lower wheat production estimates in the marketing year 2024-25 (July -June). The northern and western parts of Europe -- Italy, France and Germany -- have also been hit by heavy rainfall and storms, posing further risks to winter crops as well as spring crop planting. While the next two weeks are expected to bring dry weather in Ukraine likely reducing wheat production for 2024-25.

This season is more volatile because the weather and crop concerns are all happening at once in different countries, multiple traders said at the annual GrainCOM conference in Geneva.

Russian wheat prices began to rise in March 2024, after hitting the lowest level since 2020. Platts, part of S&P Global Commodity Insights, assessed FOB Russian wheat 12.5% at $245/mt on May 22, the highest price level since Jan. 5, when at the time the winter weather created operational issues at the Kavkaz port. Russian wheat prices increased 25% starting in the second week of March and even more dramatically in the last two weeks, rising from $219/mt May 7 to $245/mt May 22.

Commodity Insights' forecast for Russian wheat production was cut by 5.6 million mt to 85 million mt for MY 2024-25. Similarly, Russia's agricultural consultancy Institute of Agricultural Market Studies, on May 21, lowered its wheat crop forecast to 83.5 million mt for the same period, down from 86 million mt estimated May 13.

Most traders are closely monitoring Russia's wheat output projection, anticipating further price increases and major export challenges if the 2024 Russian crop falls below 80 million mt, traders said at the conference.

"If Russian wheat production reached below 80 million mt, it would be a big problem," a buyer said at the conference.

"Most buyers are waiting and seeing, until the very last second," another trader added.

In France at 1530 GMT, the September MATIF contract was trading at Eur260.25/mt on May 22, an increase of 6%, in the past two weeks, May 7-22. Similarly in the FOB CVB 11.5% and 12.5% market, prices are at the highest levels since last summer July 2023, Platts data showed.

Commodity Insights' forecast for EU and Ukraine wheat production was left unchanged at 129.5 million mt and 22.5 million mt for MY 2024-25.

"Major concerns are for winter wheat and rapeseed, while spring and summer crops still have time to establish," analysts at Commodity Insights said.

Canadian wheat hit multi-month highs

A similar trend was observed in Canadian wheat as prices began an uptrend in early April 2024 after hitting a multiyear low. Platts assessed FOB Vancouver 13.5% CWRS wheat at $314.07/mt for May 21, the highest level seen since December 2023. The Canadian wheat market was slowed over the winter when farmer sales were few and demand was weakening.

While those in the market were optimistic about planting conditions and crop expectations for Canadian western red spring wheat, adverse weather and crop reductions in the Black Sea region were causing 13.5% CWRS wheat FOB Vancouver prices to rise to multi-month highs, as Minneapolis spring wheat futures remained reactionary to global news and forecasts. A potential rail strike in Canada slated for May or June contributed to higher spot prices for Canadian wheat as well.

Demand for 13.5% CWRS wheat from the Black Sea region was minimal and typically only as a substitute for other grades of wheat used for blending purposes, participants at the GrainCOM conference said.

"FOB Vancouver prices are quite high right now, so interest is very minimal," sources at GrainCOM said.

Canadian wheat production was forecast at 36.7 million mt for MY 2024-25, according to analysts at Commodity Insights.