Prices on food raw materials are slowing down, but they remain on average values that are clearly high due to the heavy sanctions against Moscow, which have interrupted exports from the Black Sea region. In recent weeks, estimates of grain exports from Russia have been climbed by 3 million tons to 32 million, while those from Ukraine were reduced by 4 million tons.
The price of wheat and corn fell
The price of wheat on the Chicago commodity exchange, the world‘s benchmark, is down this morning to $ 10.61 per bushel (-1.46%), well below the 14-year peak of $ 12.8 in recent days, after the USDA’s outlook for world supplies exceeded estimates thanks to a bountiful harvest in Australia. The cost of corn also fell to 7.37 dollars per bushel (-3.6%), which however continues to travel close to the highs of the last 10 months (7.6 dollars), since the Russian invasion of Ukraine has limited supplies from two of the largest exporting regions in the world.
The price of soy
Soybean futures also remain high, trading at $ 16.83 per bushel in Chicago, not far from record highs in September 2012, due to continued supply disruptions as heavy fighting continues in Ukraine and ports on the Black Sea remain closed. Ukraine is a major global supplier of corn and sunflower oil, and any production interruption puts additional pressure on other grains and vegetable oils. In addition to the bullish tone, Argentina and Brazil faced severe drought due to Nino, which affected the quality and quantity of crops.
Because prices are rising
There are several reasons that have led to an increase in prices, not least the sting at the petrol pump. The impact of the increase in production costs weighs on the food sector – with the surge in the prices of fertilizers, energy, logistics and packaging materials, just to name the main ones – and the concern for drought in progress in all the north-central areas but even before the hot summer 2021. Not only Ukraine, therefore.
What do they expect
But what should we expect from the markets? The so-called fear indicators show that in the current phase investors are frightened but, at the same time, they tend to warm up immediately as soon as they hear an air of negotiation agreement, of “steps forward”. “This means – explain the analysts – that, war permitting, and if the Fed does not surprise, therefore confirms an initial rise of 0.25% and another 6-7 increases of the same magnitude in 2022, as well as a gradual reduction in the budget, we could witness some recovery. In short, we are still in a rebound phase ». This is demonstrated by the futures on Wall Street, which rise between 0.3% and 0.6% and those on the EuroStoxx which grow by 0.5%. Oil futures decline in Asia, extending last week’s decline in the wake of intensified diplomatic efforts to end the war in Ukraine. Brent futures are down 2.6% to $ 109.7 a barrel and WTI futures are down by 2.95% to $ 106.1. Both contracts have risen by around 40% since February 24, the day the Russian invasion of Ukraine began. A summit on Ukraine is scheduled for today in Rome between American national security adviser Sullivan and Chinese Communist Party diplomacy chief Yang Jiechi. Meanwhile, the Beijing embassy in Washington makes it known that it “has never heard of” a request for arms made to China by Russia, as stated by US sources cited by the Financial Times and CNN.
The importance of price negotiations
In the meantime, talks between the Moscow and Kiev delegations resume today by videoconference, after Moscow has repeatedly hinted at “progress”. Ukrainian Prime Minister Zelensky reiterates his commitment to continue negotiations with Moscow to seek a meeting with Putin. The hope that the negotiations will lead to the reopening of the ports on the Black Sea causes the prices of wheat and corn to drop somewhat, which have skyrocketed. Instead, those of soybean rise due to a squeeze in Argentina.