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A major grain crisis is approaching. XTB: The price of wheat increased by over 130% and that of corn by 106%


For the last 5 years, on average, the price at this time was 185.5 EUR / ton.

Thus, the current levels are 132.7% higher than what, in hindsight, would be “normal”.

In the US, prices rose to $ 12.79 a bushel (about $ 470 a tonne) on the Chicago Stock Exchange for grain delivered in July.

On average, in the last 5 years, at the same time of the year, the price was $ 5.18 / bushel, so the quotations are more than double the previous average level, and less than 5% away from the historical peak.

Corn maturing in August is traded in Paris at the close of Tuesday at 379.5 EUR / tonne, compared to an average of 184.25 EUR / tonne, and for delivery in November, 379.75 compared to 177.25 EUR / tonne ton on this date, the average of the last 5 years.

In the US, the price on May 17 was $ 8.06 / bushel ($ 317 / ton) compared to $ 4.24 / bush on average over the past 5 years.

Doubling from previous benchmarks is the “rule” here as well.

In the wake of major market concerns about global supply, according to UN estimates, 25 million tonnes are blocked in Ukraine, a situation described by the deputy director of the Food and Agriculture Organization (FAO) as “grotesque”.

India has decided to ban exports in response to the heatwave that threatens the harvest, and prices have reacted strongly, with almost 6% in Chicago the next day. This puts gas on fire in such a difficult situation.

India, the world’s second-largest producer, after China and ahead of Russia, had become very important in terms of depriving the Ukrainian grain market, being in a position to jump to the aid of applicants following an unexpected harvest of about 7 million tonnes more.

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Countries such as Egypt, Indonesia and Algeria, along with other importers from Africa, Asia and the Middle East, are now looking for other sources of supply, for which competition is even higher.

Although India’s measures are reversible and may be removed when the situation returns to normal, it all depends on the weather, and the unusual patterns of recent years increase the risk of restrictions remaining.

The importance of unblocking deliveries from Ukraine is thus growing. The situation is so serious that the issue is insistently addressed in talks with Russia.

The sea blockade severely limits Ukraine’s export capacity.

Rail transport is insufficient, due to capacity and especially time, as wagons from Ukraine have to wait until the axles are changed or the contents are transferred to those with the right size for the European railway system.

The logistical challenge is huge, with an average waiting time of 16 days, up to 30 days, according to EU officials.

Land and river routes would be used, along with an increased number of vehicles, wagons and barges. For the Romanian transport sector, this could be good news.

On the other hand, congestion could create, to some extent, hopefully, manageable, create other difficulties and delays for non-agricultural products.

Canada has offered to help transport grain, but for the measure to be effective, routing to ports in Romania or other surrounding countries needs to be greatly improved.

So far, the agricultural season seems to be progressing acceptably in Ukraine, given the difficult conditions, but supplying the international market – and turning grain into revenue for the country’s contorted budget – is no easy task.

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The current quantities, without the next harvest, would be about $ 8 billion.

Globally, relatively low stocks indicate that market risks remain. The drought was felt not only in India but also in Europe.

France, a major producer and exporter of wheat, recorded one of the lowest levels of rainfall in the first half of May.

The US Department of Agriculture’s global estimates are 267 million tonnes of wheat at the end of the season (in the summer of 2023), a low of the last 6 years, compared to 272 million tonnes, according to analysts interviewed.

Under current conditions, prices appear to remain at very high levels relative to the historical average.

In Romania, the preliminary signs for the harvest are relatively good, especially with the recent developments of the time, and a volume close to that of the previous year is expected, which at current prices would be very satisfactory for farmers.

Sunflower production would increase, given the reorientation of land cultivated with other cereals, thus benefiting from high prices.

In total, if prices remain the same and the agricultural year allows for production comparable to last year, producers’ revenues could be almost € 2 billion higher this year.

For consumers, high prices could persist. Tight supply conditions would mean that if the weather did not “keep up” with the harvest, in any of the world’s major production regions, the market response would be pronounced, leading to additional and significant price increases even at today’s high levels. .

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