Ukraine has started a counter-offensive in the Kherson region…both parties have been preparing for it for months so it’s hard to expect any meaningful results soon
Will the grain deal hold? The #wheat market is not sure, December CBOT +4% on Monday
We believe that the grain corridor will continue to work at least short-term unless there is a major war course change. Black Sea premiums are likely to rise though as the market has been reminded of how fragile the situation is
Ukraine has shipped 1 MMT of foodstuff from Odesa terminals, total official grain exports will be around 2 MMT. 1.2 MMT #corn and 0.6 MMT #wheat have been shipped during Aug 1 – 29 – UA Customs
Russian wheat exports are still amazingly low for a such crop…3.5 MMT of wheat will be done in August, almost -36% YOY (!)
BUT things could change. The domestic market in Russia is sharply down, export tax down, FOB down, probably weaker ruble closer to 2022 end…Russian #wheat is becoming cheap (at last!), and should see good demand shortly. At the same time, we are not sure if there is a big downside…so don’t get carried away if you want to be bearish
Despite substantially bigger Russian #wheat crop estimate (94.7 MMT; + 3.8 MMT to August forecast) we left 22/23 export forecast mostly unchanged – 43.1 MMT (+0.2 MM) as the pace at the beginning of the season has been extremely low
Last week we suggested that being short wheat was not a good idea…this recommendation stands. Escalation in the Kherson oblast increases the uncertainty for the global grains market and this could help bulls first of all
Andrey Sizov
29.08.2022
