On Wednesday, wheat prices dropped following news that Ukraine tested the viability of its primary grain shipping route.
Chicago Board of Trade (CBOT) wheat futures for December delivery shed 1.50% to $5.60 per bushel on October 04. The grain commodity continues its weeks-long erratic behavior as it has recovered by 0.91% to $5.65 per bushel today.
Preceding yesterday’s decline was a two-day gain of 4.99%, which followed September 29’s three-year low of $5.41 per bushel. Analysts attributed the unpredictability to the chaotic geopolitical environment created by the ongoing Russia-Ukrainian War.
Support for wheat prices came as the US Department of Agriculture (USDA) announced the country’s largest grain deal with China. The latter has agreed to buy 220,000 metric tons (MT) of the former’s soft red winter cereal.
Set for the 2023-2024 US marketing that began June 01, this would be America’s first large-scale grain export since November. The US last sold a booking (100,000 MT) of grain to China in July 2021.
Also, providing relief for the soft commodity is the severe case of El Niño that has plagued the Asian region. Long periods of dryness have reduced yields in many grain-exporting countries, including India, Pakistan, and Australia.
In contrast, potential grain shipments from Ukraine have pressured wheat prices worldwide. Many stakeholders have expected most exports in the Slavic country to remain paralyzed for the remainder of the year.
Ukraine May Restart Wheat Shipments
Earlier this week, reports cited indications that vessels could navigate the Black Sea again. The sea route has been considered closed due to safety concerns soon after Russia invaded Ukraine in February last year.
Twelve vessels were seen coming into Ukrainian port cities to pick up shipments of wheat and other gains. Traders and importers are waiting to see the freight rates and if the route is usable.
Industry watchers also anticipate how insurance companies will react to coverage requests for the new Black Sea cargoes. Moreover, Greece has already expressed interest in buying and reselling Ukrainian grain.
Greece Foreign Minister George Gerapetritis announced his country’s willingness to provide an alternate route for Ukrainian wheat. In addition, Gerapetritis stressed that Greece has already discussed matters with the European Union (EU) and obtained the bloc’s support.
