One-Month Low for Grains (Wheat) Price in the U.S. as Black Sea Competition Escalates

USA: The price of U.S. Wheat dropped to its lowest level in a month as an Egyptian purchase tender emphasized export competitiveness from the Black Sea region, calming concerns about war-related disruptions to Ukrainian supplies.

A stronger dollar loomed over the market, presumably reducing the competitiveness of American grains. The dollar index strengthened as recent positive economic data reduced worries about a recession but raised worries that the U.S. Federal Reserve's interest rate rises to combat inflation would continue for longer. The Wheat auction in Egypt provided a timely reminder of the fierce export rivalry from Black Sea providers. Russian Wheat was offered in the tender at the lowest price, while the only non-Black Sea Wheat offered was French supply, and no U.S. Wheat was offered.

Recently by making advance purchases, global Wheat buyers have been preparing for a price shock for the product. Global Wheat buyers, scarred by high and unstable prices, are decreasing their purchases of future supply, but this increases their susceptibility to prospective price spikes that would be passed on to consumers who are already experiencing food inflation. Benchmark After Russia invaded Ukraine, a major exporter, and because of unfavorable weather in other producing countries, the supply of Chicago Wheat futures fell to a record low in March. While physical grain prices are still high in the face of supply uncertainties in the Black Sea region and worries about the harvest in the United States, futures have fallen by 48% since their peak last year.

As per the ChemAnalyst database, the price of Wheat is likely to be unstable in the U.S. domestic market backed by Wheat is readily available from the Black Sea and Australia, and prices may decrease in three months, reducing the need for U.S. exports. Russian Wheat is being sold for around $340 per tonne, including Cost and Freight (C&F), for delivery to Southeast Asia, whereas hard red winter Wheat from the U.S. is listed at about $390 per tonne. This further increased the Wheat stocks in the domestic market of the U.S., leading to a decrease in the price of the product amid high competition in the Black Sea region.