A Harvest well below expectationsboth qualitatively and quantitatively, in all Mediterranean countries on the one hand and the non-renewal of the agreement on Ukrainian wheat on the other: it is the combination of these two factors grains and oils. In Chicago, September wheat futures have already risen to $690 a bushel this week before falling below $670, while the December corn contract is up more than $690 a bushel. It topped $520 a bushel by 3% in trading on July 18 alone. Then what can we expect? next months? What impact can be expected on our basket of goods and, more generally, on international geopolitical balances? We asked Enrica Gentile, Founder and Managing Director of Areté Srl and Annachiara Saguatti, Senior Market Analyst same company. We recall that Areté is an independent company specializing in economic analysis and forecasting for agricultural and food markets.
Disappointing wheat campaign across the Mediterranean
“In fact, markets had already realized that Russia would pull out of the deal, so the reaction to the news was less nervous than expected,” notes Gentile. The effect will probably be greater Harvest campaign 2023“For soft and durum wheat in particular, it has proved disappointing in all Mediterranean countries, due to the extreme atmospheric events that have also affected yields in Italy, among others.” Speaking of the country: in the last five years it has succeeded of national production, covering an average of 60% of domestic needs for durum wheat (whose semolina is mainly used to make pasta) and about 38% of domestic needs for soft wheat (whose flour is mainly used to make bread and sweets). The rest of the need is covered by wheat imports from abroad: “But Ukraine – specifies Gentile – is relevant only for the import of common wheat.”
Alternative export channels: the Ukrainian “Plan B”
However, returning to the Russian-Ukrainian conflict and how its developments could affect food prices, it should be remembered that Ukraine has also been consolidating since the start of hostilities alternative export channels, which therefore do not require departure from Black Sea ports. “We are talking specifically about canals on land and through the ports of the Danube,” Saguatti explains. Since the beginning of August 2022, after the signing of the “Black Sea” agreement (that is the name of the passport that Russia granted to Ukrainian merchant ships crossing the Black Sea, ed.), about half of Ukraine exports grain and Seeds and olii have passed through the alternative logistics network. This could cushion the impact on the markets of not renewing the agreement.” With all due respect to the Eastern European countries, which have been urged by the EU on several occasions in recent months not to block overland transport of Ukrainian raw materials, which were exported at a price that well below what is required in their respective inland markets.
Possible future scenarios
Which scenarios So is there anything to be expected for the near future, especially as far as food prices are concerned? “For corn (important for breeding, even before human needs, editor’s note), the latest crop forecasts are better and in line if not better than previous years, so we see no price tension,” concludes gentleman However, this will not be the case for wheat, as harvests will be negative in all Mediterranean countries in Europe. In this context, Ukraine will play a much smaller role, not so much due to the loss of the agreement with Russia, but due to the lower availability of stocks (we are talking about -50%), caused by a year of war, etc., a “sharp slowdown in agricultural activity “.