World wheat prices fell sharply after prolific harvests

World wheat prices fell sharply after prolific harvests

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In 2022, the war in Ukraine has caused price hikes, shortages of some staple foods and raised fears of famine in some countries. However, currently, the price of cereals on trading platforms is falling, thanks in particular to excellent global harvests.

Just Friday, the Food and Agriculture Organization of the United Nations (FAO) announced that 2022 had been a sadly record year: the price of wheat and maize soared, sending the index jumping FAO commodities.

Unheard of since 2011, a year sadly marked by a food crisis and riots linked to famines in several African countries.

>> Read about it: World food prices below their level of a year ago

But now, the trend is reversed: wheat prices are falling. The market digests the good harvests in Australia or Russia as if there were no war in Ukraine. A barometer: the benchmark soft winter wheat futures contract, which this week fell to its lowest level in more than two years on the Chicago Stock Exchange.

Flamboyant Russian exports

Russia, the world’s leading wheat exporter, is posting an excellent harvest with more than 100 million tonnes. The mild winter weather allowed him to forecast “historically high” exports, according to a local observer. And to hell with the costs of transport or insurance that take the elevator to navigate the Black Sea.

Moscow also has no problems selling its crops, especially to Egypt, which is heavily dependent on its Russian imports. The situation there is particularly fragile at the moment with a currency that was devalued by half on Wednesday on the orders of the International Monetary Fund. And with an increase in the wheat import bill of more than a billion dollars last year, the Egyptian population is literally gripped by the throat.

Russia therefore easily exports its wheat, but it is not alone. India is making a strong comeback in the global market and Australia is predicting a record season. In short, there is too much wheat in the world right now, say analysts.

Especially since competition is also played out in Europe, where Russian wheat is very cheap compared to American wheat, penalized by exchange rate effects. At the maneuver, we find the four big grain trading houses, ADM, Bunge, Cargill and Louis Dreyfus, also known as the “ABCD square”.

“logical” phenomenon

Normally, the current levels should continue even if the war continues in Ukraine. Because Ukraine is a secondary player in the wheat market, unlike that of corn, said Philippe Chalmin, economist at Paris Dauphine, Thursday in the 12:30 p.m. newspaper.

>> Philippe Chalmin’s interview in 12:30:

Cereal prices are down sharply: interview with Philippe Chalmin / Le 12h30 / 4 min. / today at 12:38

“Agricultural products are not affected by any embargo, freight rates have rather decreased. Insurance premiums are rather high, but this is a rather marginal dimension. So for now, the market for wheat reacts quite logically to the world cereal harvests, close to historic levels”, he summarizes.

This specialist in agricultural raw materials also recalls that throughout the past year, “there has never really been a problem of shortage”, the surge in prices resulting mainly from financial speculation.

Subject and radio interview: Frédéric Mamaïs and Dominique Choffat

Web text: Pierrik Jordan

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