The Mintec Benchmark Prices [MBP] for Wheat Milling 11% DDP Rouen FR [Mintec Code: WROF] was assessed at €260.00/mt, down €10.00/mt week-on-week (w-o-w). The price decline is due to ample global wheat supply, as well as a lack of demand from buyers. The extension of the grain corridor deal also pressured prices, but there is still uncertainty about the time frame of the deal. Thus, market players believe that the market could continue to witness some volatility in the coming weeks. Additionally, in the spotlight is the banking crisis that has crossed over to Switzerland with the bankruptcy of Credit Suisse. Market players think that financial sector problems could cause weakness in the global economy and negatively impact energy demand.
As of 18th March, the grain corridor deal was extended in line with market expectations, but the time frame remains uncertain. A Mintec source commented, “it is clear that the deal remains, but whether it is extended for another 60 days according to Russia, or for 120 days according to the demands of Ukraine is still unclear. And I think until we have some clarity, there won’t be any forward deals. What is clear is that Russia continues to demand the removal of all restrictions affecting its economy, but also it is in its interest to continue with the deal regardless of the ongoing conflict.” According to market players, in the 60-day scenario, the deal would be unfeasible, because 60 days is not enough time, given that there are huge queues at the Black Sea due to slow vessel inspections on the Russian side. Some vessels are waiting over a month to be inspected. A Mintec source added, “120 days is something where we could see a normal pace of the agricultural products flow again.” Also, on 21st March, Russia’s Foreign Ministry announced that it would suspend the deal on 18th May 2023 if no progress is made on easing obstacles to its own food exports.
Ukrainian ports witnessed low demand this week, partly due to uncertainty on the grain corridor time frame, as well as buyers’ sufficient stock levels. A trader commented, “the market looks weak, with minimal movement, yet I think prices will increase slightly due to grain corridor timing uncertainty.” Market players are also questioning how much grain Ukraine has available for export, given that the 2022 harvest was smaller and the 2023 planted area is also expected to be lower. Based on the market estimates, Ukrainian cereal crops will reduce by 37% on average in the 2022/23 season. A Mintec source added, “there will likely be reduced Ukrainian supply, and if we have adverse weather conditions in the US or in Europe, which is not uncommon at this time of year, this could impact production for the coming harvest. This is something to watch out for because it could easily switch the price direction.”
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