Grain market tightens on Ukraine and US news

With disruption to the 2022 Ukrainian harvest now a certainty, Cedric Porter takes a look at how fears of a global grain shortage are driving global cereal markets Russia's withdrawal from parts of Ukraine has had little impact on the global cereal market, with fears over a global grain shortage still driving the market.Meanwhile, US crop stocks, planting and condition reports have not helped calm the situation.Talks between Russia and Ukraine had set a weaker tone for the market last week, but prices rose again when it was clear that any progress would be slow and that disruption to the 2022 harvest in Ukraine is now a certainty.About a third of Ukraine’s normal spring crop area may be unsown this year, according to the UkrainianAgribusiness Club, with crops which are in the ground impacted by a lack of fertiliser, fuel and plant protection products.Wheat areaThe club also estimates 40 per cent of the country’s wheat area is in regions where there has been active hostilities. It predicts the Ukrainian wheat harvest will be at 19 million tonnes, rather than the 32mt it has been in the past, which will inevitably lead to reduced export availability.Simon Ingle, of Frontier, said: “There has been lasting damage caused to Ukrainian export facilities and other infrastructure and there are questions as to how this will affect spring cropping in Ukraine.”Russian grain production will not be so affected by the conflict as in Ukraine, but its own restrictions on exports and sanctions imposed by countries across the world mean its grain will not feature so significantly on the global market this year.It will impact on northern African countries such as Egypt and Tunisia in particular, who normally import large volumes of Russian wheat and have been looking for alternative supplies.France has said it will help ensure Egypt gets the wheat it needs this season, while Egyptian officials are trying to secure up to 12mt of wheat from India.The disruption to the Ukrainian and Russian markets mean supplies from other parts of the world are even more important this year than normal.Therefore, the US Department of Agriculture’s (USDA) Prospective Planting report gained more attention than normal when it was published last week.Plantings of all crops are virtually unchanged at 128.4 million hectares, but that masks a 1.4 per cent increase in the wheat area to 19.2m ha, a 4.3 per cent increase in the soya bean area at 36.8m ha, but a 4.2 per cent drop in the maize area to 36.2m ha.MaizeAlice Jones, senior analyst at AHDB, said: “A further tightening to global supply of maize is likely to support new-crop maize prices.“Maize will provide a floor for the wider feed grains complex and if global prices are supported, will likely provide support for wheat and barley too.”Global markets also found support in USDA reports of a 22 per cent drop in US wheat stocks at the beginning of March at 27.9mt, which was below market expectations.The first weekly US crop condition report of 2022 showed 36 per cent of the wheat crop in 18 states covering 90 per cent of planting was in a very poor or poor condition.That compared to 16 per cent in 2021 and just nine per cent in 2020.The proportion in good to excellent condition was 30 per cent, comparedto 53 per cent last year and 62 per cent two years ago.In late March, the EU estimated 2022 wheat yields across the union would be 5.8t/ha, 0.2 per cent down on last year.