GRAIN - Is the Rally Over or Yet to See Some More Heights?

Impact of battle- Ukraine and Russia

The world's wheat and corn prices have risen to historic highs, reflecting a severe shortage of supplies already underway. In addition, Ukraine's ports are currently blocked, which means that over half the corn and almost one-third of the wheat intended for export are still in the country's silos.

In addition to attacking Ukraine, there is also evidence that Russia's export volumes are in jeopardy since the government often stifles international trade to battle inflation, which is quickly escalating in Russia due to west sanctions. Moreover, it is essential to notice that the recent supply shock is co-occurring with the fallout from COVID-19, which has already impacted prices in a significant way.

Production and dealing

Ukraine and Russia are leading exporters and producers of crops internationally. Global wheat and corn trade in these two countries accounted for 27% and 15%, respectively, during the 2021/2020 marketing year.

Despite the bumper crop and competitive prices, Ukraine expected record wheat exports before the conflict. Ukraine exported wheat at 27% more than a year earlier. Corn exports increased 10% in the October-December period.

Impact on black sea grain exports

Crops that are now growing or will soon be planted will determine most of the global food supply in the coming months. Production and exports will take place in other areas, especially wheat. But this additional supply won't even come close to compensating for the shortfall caused by the Black Sea. Moreover, fertiliser prices and supply shortages will affect crop yields and Production well into 2023, reducing food supplies globally.

Getting corn out of Ukraine

As global supply availability remains uncertain, corn futures have soared to new highs. The Ukrainian corn market was expected to rank fourth in the world in 2021-22. Unfortunately, this corn remains inaccessible, despite its claim to prominence amid the war.

Some Ukrainian grain has been transported by rail to Poland and Romania, but not in volumes as large as those fascinated by its Black Sea loading facilities. First, shipments by rail can only carry a tenth as much grain per month as shipments through the Black Sea. The second problem is that its railcars require a change of wheels when passing through the borders of other countries since Europe's faster railways need smaller wheels than Ukraine's.

Ukraine shipped 1.09 million metric tons of grain in April. The amount of grain exported between May 19 and May 20 was 643,00MT.

Ukraine's farmers hindered- Global food shortages

In the coming weeks, millions of tiny spring sprouts which should appear from static winter wheat stalks are at risk of being wiped out by Russian troops invading Ukraine. Farmers in the developing world may lose thousands of so-called tillers if they cannot feed those crops soon, threatening the national wheat harvest.

Wheat, having been planted last autumn, fell dormant for the winter after a brief growing period. To encourage the tillers to grow off the central stalk, farmers typically spread fertiliser before the grains return to life. As a result, the yield per wheat stem increases exponentially when each branch has three or four tillers. There are a myriad of factors that are affecting the grain prices.

U.S. Farmers and the unfavourable weather

Corn, soybeans, and wheat are all being planted behind pace, with farmers trying to get their crops in the ground as quickly as possible.

A combination of rain and cool temperatures has delayed planting plans in parts of the Midwest, which has given farmers more time than a week to plant crops before losing out on a bigger harvest. However, some grain traders believe that, if they do not, agricultural commodities will rise even more, as an increase in demand and dwindling supplies result from harsh weather around the world.

U.S. Department of Agriculture data showed about 22 percent of corn had been planted, compared with 50 per cent for the previous five years. According to the USDA, Farmers produced soybeans at a rate of 12%. In addition, farmers planted spring wheat at a rate of 27% compared with the 47% average.

Higher fertiliser prices and its shortage

There is a likelihood that U.S. farmers will plant less corn this year and use less fertiliser because supplies of fertiliser are limited, and prices are sky-high. All quotations have reached all-time highs in international fertiliser benchmarks. Nitrate fertiliser prices have significantly increased the most.

High food prices could harm food security, particularly in low- and middle-income countries. However, price spikes in fertilisers and availability concerns could also result in a prolonged increase in food prices.

China- Corn rumours and future grain predictions

In recent years, China bought more corn than ever before, contributing to the first-phase agreement's agriculture goals.

It is rumoured that China purchases up to 7 MMT of corn per year from the United States and has recently purchased an enormous amount of corn. So there would be a big boost to the corn market with these 275 million bushels of corn.

Across the country, planting progress is 94%, an increase of 8 percentage points over the five-year average of 92%.

While corn futures are steady to slightly higher, wheat futures have been strong enough to pull the corn market upward. Trade volume is low as traders wait for Russia, Ukraine, and Turkey to meet to see if they can make any progress towards opening the Black Sea grain corridor.

The Russian government wants the U.S. to drop its economic sanctions before allowing the grain to pass through. Corn fluctuated by 13 cents in July and is currently up 16 cents. The price of December corn has advanced by 14 cents.

A 28-cent range has been seen in the trading of July soybeans, and the price is currently up 2 cents. CBOT wheat is up 58 cents, while whole wheat futures are higher. The Kansas City wheat price is up 54 cents, and the Minneapolis wheat price is up 42 cents.

CME Corn July 2022

The July corn closed up 15 cents at $7.42. The December contract closed 12 cents higher at $7.02. July and November soybean contracts closed higher by 1 cent and 6 cents. KC wheat closed up 49 cents, Minneapolis wheat up 39 cents, and CBOT wheat closed up 53 cents.

A 73% good/excellent rating was cited for the corn crop, while 4% of the crop was considered poor/very poor. In contrast, 72% of the previous year's respondents rated their performance as good or excellent and 5% as poor or very poor.

Soybean

Sixty-six per cent of soybeans have been planted, compared with sixty-seven per cent in the previous five-year average; 39 per cent have emerged, compared with 43 per cent during the last five-year average.

Wheat

Wheat achieved a seven-year average of 84% for winter wheat. Among wheat conditions, 30% were good/excellent, and 40% were poor/abysmal. According to the previous year's average, 50% of respondents rated their experience as good or perfect and 18% as poor or very poor.