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Another record grain harvest in Russia: 147 million tons of wheat, of which at least 65 million will be exported. Both the UN and the World Bank predict a decline in grain prices. Analysts: alarmist forecasts after the closure of the so-called “Black Sea Wheat Agreement” were dictated more by the political situation than by the actual availability of grain on world markets
In October, the Food and Agriculture Organization of the United Nations (FAO) revised the world price index for agricultural products downward by 0.5% compared to the previous month. UN analysts reported “widespread declines in all sectors except dairy products.” The FAO index, which continuously analyzes global price trends for the most commonly traded agricultural products, recorded an average of 120.6 points in October, down 10.9% year on year. As FAO experts emphasized, “cereals (except corn) and vegetable oils are suffering from oversupply and weak demand from major importing countries, while the dairy sector is going against the trend.”
In particular, wheat prices fell 1.9% in October, helped by ample supplies from the US and strong competition among exporters, where Russia leads the way and has announced a new record harvest on November 8th. “Based on the results of the first week of November, Russian farmers have already harvested 147 million tons of wheat, of which at least 65 million can be exported,” said Deputy Minister of Agriculture of Russia Oksana Lut, according to whom Russian agricultural exports are rather restrained due to insufficient internal transport, railways, and not because of Western sanctions. “We don’t have many problems at the international level,” the Russian deputy minister emphasized, recalling that in 2023, a new port of Vysotsk on the Baltic Sea in Russia was put into operation, through which mainly Siberian wheat will be exported. The new Russian port, the largest in Europe, will be able to sort and export up to 4 million tons of grain per year.
President Vladimir Putin previously estimated the size of the 2023 harvest at 135-138 million tons.
During Putin’s visit to Beijing in October, Russia and China signed a “historic” agreement, under which Moscow has committed to sell wheat to Beijing for an astronomical amount of 2,500 billion rubles ($25.7 billion). Over the next 12 years, Russia will export to China 70 million tons of various grains: wheat, corn, sunflower seeds, and legumes.
Against the backdrop of favorable data just announced by Russia, the International Grains Council (IGC), a British agency that specializes in analyzing grains and oilseeds markets, also raised its estimate of the global durum wheat harvest, increasing it from 30.6 million in August estimates to 31.4 million tons at the beginning of November. As reported by Agrisole, a supplement to the main Italian political, economic, and financial newspaper Il Sole 24 Ore dedicated to agriculture, despite this “promotion,” it is still “a result that remains 5.7% below the 2022 figure, but which includes an upgrade in Turkey in September estimates, only partially offset by worsening forecasts in Canada, where drought is having a major impact on rural yields.”
Canada, historically the world’s leading producer and exporter of durum wheat, has lost more than 30% of its average harvest this year, as another season of severe water shortages hit major wheat-producing provinces. “From last season’s 5.8 million tons,” explains Agrisole, citing IGC data, “the Canadian harvest should fall to 4 million tons, in a situation of shortfalls, with stocks falling to less than 400 thousand tons (-30% year on year).” At the Chicago Grain Exchange, prices for wheat futures expiring in December are hovering between $572 and $576 per bushel (27,216 kg).
Although the summer of 2023 was particularly dry in Europe, the best situation for durum wheat production was in Turkey, where “high international prices have stimulated investment this year, and yields have increased due to the introduction of more productive seeds.” According to IGC, this year the durum wheat harvest in Turkey will be at least 4.1 million tons (+28% year on year), of which 1.2 million tons could be exported. Global durum wheat consumption is estimated by IGC at 33.5 million tons, or 1.6 percent lower.
Finally, the World Bank (WB) also predicts an overall decline in agri-food prices of 9% this year and 2% in 2024, primarily due to “improving global supply prospects for grains and oilseeds.” In other words, the alarmist forecasts after the closure of the so-called “Black Sea Wheat Agreement” were dictated more by the political situation rather than by the actual availability of grain on world markets. The only exception is the price of rice, which, according to WB analysts, “will close 2023 with prices rising by 28%, and next year will face a projected rise in prices of another 6% due to the effects of the El Niño weather phenomenon and particularly protectionist policies of India.” In July, the government of India, the world’s largest rice exporting country, announced its decision to “ban foreign sales of Indian rice.”
As for the rest of the grains, the WB forecasts “a decline in prices of 3% on average over the next two years, after minus 11% this year, thanks to stable supplies and an improvement in the ratio of stocks to consumption.”
