Wheat Market Remains Volatile

The Mintec Benchmark Prices [MBP] for Wheat Milling 11% DDP Rouen FR [Mintec Code: WROF] was assessed at €234.00/mt, up marginally 0.43% week-on-week (w-o-w) on the 4^th of May. Yet, overall, the wheat market looked rather bearish this week as there was no significant buying interest or news that could impact market fundamentals. The only supporting factor is the future of the grain corridor deal, which remains difficult to assess. Wheat futures were also lower at the start of the week on the back of strong fund selling and a slight improvement in the weather conditions for the US wheat-growing areas. Market players believe that the ample Russian wheat supply will continue to weigh on the market in the short term.

The market continued to witness slow or, in some cases, the total absence of vessel inspection in the Black Sea this week. A trader told Mintec, “the grain corridor deal is almost dead, yet we can’t see a price reaction in the market. The market thinks that Russia is bluffing about the suspension of the deal and trying to milk some concessions. Some traders are not factoring in disruption in the Black Sea supply yet, but their concerns are growing.” Another trader told Mintec, “I’m dead pessimistic about the grain corridor continuity. The fact that Russia is not inspecting cargoes leaving the Black Sea, or that they are deciding which vessel is leaving or not, does not help confidence about the extension of the deal.” Russia continues to insist that it will not extend the grain corridor deal beyond 18th May and that it will not register new ships under the ‘grain deal’ if they fail to complete grain transit by 18th May, unless the West lifts sanctions that are hampering their payments system. Therefore, should the grain corridor deal end, the supply of grains out of Ukraine will start to disappear. Suspension of the grain corridor would be more important for a new crop that is starting in late June, as the Ukrainian grain export program for the 2022/23 crop has been over 80% complete. Although Russian and European supplies are expected to be large this year, the global stocks are expected to decline, with the decline in US carry-out. Thus, market players believe that global wheat prices will trade in a large range, with a bias towards higher prices, as there is no sight of global carry-out expansion.