E08: ๐ŸŒพ๐Ÿ“ˆ Price Shocks in the Global Grain Market

March 16, 2022
7 min
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๐Ÿ”Ž The global grain market experienced price shocks throughout late February and early March. CME wheat futures reached a 14-year-high mark while corn futures reached close to a historical record. With Ukraine and Russia playing a crucial role in world grain production, the grain market is expected to face further turbulence. Learn more about the situation, how it affects key importers and alternative producers, and expectations for the upcoming months in this episode.

๐ŸŽ™ Tridge's Global Market Analyst Eugene Tomashevskyi joined us to share his insight into the situation.

๐Ÿ“– For more information on todayโ€™s episode, read our article on price shocks to the global grain market here.

๐Ÿ’ป Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates on https://www.tridge.com/intelligence-data.


0:00 Hey, thanks for stopping by.

0:01 This is free on board a podcast by Tridge.

0:04 You're in the right place.

0:05 If you're looking to stay up to date with the latest food and agricultural news. Now, onto the updates.

0:19 Welcome to episode eight of Tridgeโ€™s podcast where we discuss how the Russian invasion of Ukraine is affecting the grain market.

0:25 I'm your host, Hyesun Jang, a global market analyst at Tridge.

0:28 And today we'll be talking about how tensions in Russia and Ukraine have led to a surge in the wheat futures market and what we expect will happen in the upcoming months.

0:42 So joining us today is global market analyst and grains specialist Eugene Tomashevskyi. Welcome to the podcast, Eugene.

0:48 Hello everyone.

0:49 Thank you for joining all of us. There is a lot going on here on the market.

0:55 Yeah, thank you so much for making the decision to join our podcast

0:59 Eugene.

0:59 I know things must be very hectic over there, so thank you for sharing your analysis with us today.

1:05 So I'll just jump right into the first question.

1:08 I know there has been some turbulence in the grain market recently.

1:11 Can you tell us what happened in the grain market during the last couple of weeks? There has been a lot going on in the global trade market.

1:19 The futures have experienced severe turbulence.

1:22 over the past two weeks for example, the Chicago mercantile exchange rate May futures have reached $12 per bushel on March 4th at the end of last week or in other words, it's $444 per metric town.

1:36 whereas last week, prices have fluctuated between 320 and 340 metric tons, which means an increase from $100 to $220 per metric ton.

1:47 This is the reaction of the global grain market to what is happening right now, is the emphasis on the war between Ukraine and Russia.

1:55 This is the most powerful political factor that has been supporting the market over the couple of weeks.

2:01 And why is this a significant thing that has happened?

2:05 Everyone really knows in the world that grain, especially if it is a staple commodity.

2:10 So the jumping global wheat prices are of the highest significance in the agricultural arena, because this cereal is the generalization of the world's food security and a disruption to the supply chain

2:22 in the central exporting countries would lead to an increase in prices parking the ongoing food inflation that has been going on in the world for the past year because of COVID, that is why it is of high importance for us.

2:34 I see.

2:35 Can you explain to the audience how this relates to tensions in Russia and Ukraine?

2:41 These tensions which are going on at the moment are of high significance for the global world, and everyone who is really watching what is going on.

2:48 So, Ukraine and Russia together possess one of the largest shares of wheat supplies in the world.

2:54 Both countries account for 29% of global wheat exports.

2:59 The war conflict in the black sea region means that these grain shipments are distorted and they're going to be distorted in the short term.

3:06 It's inevitable Let's say, exports from Ukraine have been suspended since the 25th of February.

3:11 While the shipments from Russia from the sea of Azov, the main hub for Russian grain exports have been paralyzed as well, it means that the supply chain is paralyzed at the moment.

3:24 This is all happening at the same time when the world is experiencing little supplies, lower supplies than usual caused by lower harvests in central producers like Canada, the United States, and Russia.

3:36 But at the same time, for example, Ukraine received a bumper crop of almost 35 million tons which is trying to offset the losses in the northern hemisphere. Let's say

3:46 in January 2021, 2022, Ukraine exported more than 17 million tons of grain, which corresponds to 70% of its export potential.

3:55 But we don't know what's going on with the rest of 30% of all Ukrainian wheat exports that hadn't been used so far, which means that again, this food security in the region might be disrupted.

4:07 I think you touched on it a little bit, but can you tell us a bit more about any importers or alternative supplying markets that were affected by these recent events.

4:18 So there are too many groups of countries that are being affected by the current conflict.

4:24 The first is North African countries and of course Asian countries, these countries including Egypt, Indonesia, Bangladesh, Pakistan, and many others.

4:31 For example, on the 26th of February, Egypt announced its wheat tender to buy wheat from Russia and Ukraine where it usually does.

4:40 But unfortunately only one offer from a French exporter came and therefore the standard was canceled.

4:45 The same applies to Indonesia, which is responsible for one-third of grain imports from Ukraine.

4:52 So Indonesia last year imported three million tons of wheat from Ukraine.

4:57 And of course its supplies may be jeopardized as Indonesia will have to switch to other countries like buying from Australia or Argentina and etc.

5:09 I see.

5:10 Did this impact any other product markets? There's been a tremendous impact on the adjacent market or let's say corn market.

5:20 It has also reacted in the same way as the wheat market, Chicago mercantile exchange corn futures touched a 10-year-high and reached $297 per metric ton last week.

5:33 So because Ukraine and Russia are also responsible for 90% of total corn exports of which Ukrainian exports account for 17%.

5:42 So you can imagine the impact then the disruption from the supplies from Ukraine and Russia may cause to the vault. What do you expect will happen in the market?

5:54 So there are a few scenarios, possible scenarios that may develop in the market.

5:59 So futures and export prices are likely to fluctuate at the near peak levels in the next month because it's not so easy to offset losses from the supply disruption in the world's biggest grain hub.

6:13 This is the feature of the grain market - that the wheat market supply is inelastic in the short term.

6:20 So traders will be closely watching the development of the situation in the Black Sea region and within the current sowing campaign, some exporting countries could extend the sowing area under the spring wheat, for example, Canada and the United States to meet the gaps in the global supply.

6:39 And in addition, high prices for this cereal would help farmers and exporters get more significant profits.

6:45 Australia and Argentina may also increase the planting acreage under the cereal given the current circumstances.

6:52 So all the situation will depend on how the market is reacting to the current war conflict between Ukraine and Russia in the Black Sea region.

7:01 I see.

7:02 Thank you so much for sharing your analysis with us today, Eugene.

7:06 Thank you for joining Tridgeโ€™s podcast and I hope this information will be beneficial for all of you.

7:21 If you enjoyed this episode, please leave a review.

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7:26 Check out tridge.com/intelligence-data for more price analyses and up to date insights into the food and agricultural industry