NAPERVILLE, Ill., Dec 6 (Reuters) - The global wheat
market has perhaps never faced more uncertainty than in 2022,
with Russia's invasion of fellow grain exporter Ukraine early in
Chicago wheat futures are still elevated versus most years,
though they are slipping significantly versus prices elsewhere
and against competing grains, even as supplies remain tight.
Numbers could change in Friday's update from the U.S.
Department of Agriculture, but its estimates last month implied
stocks-to-use among major wheat exporters hitting 15-year lows
by mid-2023, meaning the fundamental narrative has not greatly
shifted in recent months.
However, world wheat futures are falling. Most-active CBOT
wheat settled at $7.29 per bushel Tuesday after hitting a
14-month low. Paris-based Euronext wheat for March delivery
on Tuesday slipped below 300 euros per tonne for the
first time since early March. It had traded over 400 euros back
That means more than just the Ukraine war premium has been
removed from Chicago wheat, which averaged over $7.70 per bushel
in January, the month before the invasion.
The market sensed escalating tension at the time, but wheat
traders were unprepared for the Feb. 24 invasion, as evidenced
by the unprecedented run-up in futures. By the first week in
March, most-active CBOT wheat had surged more than 50% within 10
To put that in context, the previous biggest 10-session run
in percentage terms was around 35% in August 1973, and a near
32% spike was observed in August 2010. The steepest 10-session
losses were all near 22%, occurring in 1974, 2008 and July 2022.
Through Tuesday, CBOT wheat's 10-session decline totaled
11%, almost a record for the time of year.
Most-active CBOT wheat reached an official all-time high of
$13.63-1/2 per bushel on March 8, narrowly topping the 2008
record, though the 2008 build-up was more gradual than in 2022.
LOW SUPPLIES, LOW PARTICIPATION
Heading into 2022, exportable global wheat stocks were
already razor thin. USDA's February projection showed
stocks-to-use among key suppliers at an all-time low by
mid-2022, so the Ukraine invasion was a particular shock for the
Before February, Ukraine accounted for near 10% of the
world's wheat exports, but that is estimated near 5% now. Top
exporter Russia's wheat shipments have been much better than a
year ago, helping to keep a lid on prices, though Ukraine's
volume last month was down 20% on the year.
Uncertainties with Ukraine did not attract participants to
the market this year, as open interest in both CBOT wheat
futures and options has hovered at more than decade lows. The
late February invasion had no meaningful impact on that trend.
CBOT wheat trading volumes were moderately impacted. Average
monthly volume in March was 4% above the five-year normal, but
it was below normal in every other month in 2022. The biggest
departure was 43% in April, then volumes stayed around 30% below
average for the following four months before improving later in
Mild volumes and interest mean that changes in speculative
positioning have been very slow, though money managers have
built their most bearish CBOT wheat view since May 2019. Through
November, funds' average 2022 weekly buying or selling in wheat
was the lightest since 2008.
CBOT wheat is particularly weak against competitors.
Front-month December contracts are in delivery, but on a
second-month basis, European wheat's premium versus Chicago
reached 45 euros per tonne this week, the largest since May
Second-month Kansas City wheat is just over a dollar
per bushel more expensive than Chicago, which has been the case
throughout the last month. But before November, the K.C. premium
had not consistently maintained those levels since 2014.
In 2014, the U.S. hard red winter (HRW) wheat crop,
reflected by K.C. futures, took a sharp downturn coming out of
the winter, resulting in very poor yields. The current HRW crop
is in terrible condition, but general global wheat supplies were
building in a strong way in 2014, which is not the expected
outcome this year.
CBOT wheat usually sits at a premium to CBOT corn, but it
has lost significant ground to its yellow grain competitor.
Most-active wheat's premium to corn on Tuesday slipped below 92
cents per bushel, its lowest since July 2021. It had opened the
month above $1.20.
But the new level is closer to "normal" compared with most
of this year. Wheat's premium to corn averaged $3 per bushel
from March through July, which had not been seen since 2008.
Historically, something around $1 or just above has been a more
long-term sustainable level.
Wheat's losses against corn come as corn also hits
multi-month lows. Most-active corn futures Tuesday dropped
to the lowest levels since August, settling at $6.37-1/4 per
bushel. That is down nearly 9% since the start of November, the
most for the period in 11 years.
Karen Braun is a market analyst for Reuters. Views expressed
above are her own.
(Writing by Karen Braun; Editing by Bradley Perrett)