For the Quarter Ending September 2023
In the third quarter of 2023, the North American region, especially Canada, witnessed a noteworthy decline in wheat prices. This downward trend was primarily attributed to favorable growing conditions and a productive harvesting season in Canada throughout July. The abundance of major field crops resulted in a substantial increase in exports and a significant rise in domestic stockpiles. Although year-end inventories of major field crops are expected to slightly increase, they are not considered burdensome. Despite facing persistently high temperatures and inadequate soil moisture levels, Canada expressed concerns about the quality and export potential of its fresh wheat crop. As a result, wheat purchasing activity significantly decreased, limiting opportunities to fill the export gap. Market liquidity remained low due to ongoing volatility, posing challenges to price discovery as trade participants remained disengaged. Inflation held steady in September, but economists anticipate a gradual easing of price pressures in the coming months. According to the U.S. Bureau of Labor Statistics, the consumer price index increased by 3.7% compared to the same period last year. Various factors, including competitive logistics and reduced demand from key trading partners, contributed to the continuous decline in wheat prices and exports for the month. As September 2023 concluded, the cost of wheat in Canada settled at USD 252.
In the APAC region, specifically the Indian market, wheat prices exhibited mixed market sentiments throughout the entire third quarter of 2023. Prices declined in the first half of Q3, improved in August, and then declined again as September began. In July, a significant drop in wheat prices occurred due to the impact of an ongoing heatwave in India, leading to power outages, water shortages, and disruptions in businesses and transportation. This situation reduced disposable income, lowering the demand for wheat-based products. However, demand from downstream food and feed industries remained moderate, balancing overall supplies among Indian merchants. To counter the heatwave’s impact and reduce food inflation ahead of upcoming elections, India initiated discussions with Russia to import wheat at a discounted rate compared to rising global prices. Wheat prices increased by approximately 2% in August, despite sufficient supply in the nation. Attempts by some individuals to create an artificial shortage kept prices relatively high in mid-Q3. By September 2023, the Indian market witnessed a significant drop in demand within the agricultural grains industry. Participants strategically focused on reducing their wheat stockpiles by destocking at lower prices than anticipated. Additionally, favorable weather conditions led to higher product availability, fueling increased inventory levels among local manufacturers and retailers for the month.
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Throughout the third quarter, the European wheat market experienced a fluctuating trajectory. The withdrawal of Russia from the Black Sea Grain Agreement significantly impacted wheat prices, given that Russia and Ukraine are major global suppliers of wheat and sunflower oil. This move escalated inflationary risks, disrupting supply chains and increasing commodity prices. In July 2023, Russia’s inflation rate reached 3.3%, driven by the ongoing Russia-Ukraine conflict, which disrupted supply chains and raised commodity prices. The ruble’s depreciation made imports costlier for businesses and increased wheat prices for foreign buyers, making it challenging for farmers, traders, and consumers. With Russia’s departure from the agreement, the scarcity of ships and Western traders’ eagerness to engage with Moscow raised transportation costs for Russian wheat, especially as the Ukraine conflict threatened vital Black Sea supply routes. As September began, downstream demand for wheat decreased, further weakening purchasing sentiments. The high inflation rate posed a significant challenge to the Russian economy, reducing consumers’ purchasing power and hindering business operations. Pressure mounted on the Russian government to address inflation, although available options remained unclear. Traders speculated that Russia’s surplus supply this year would maintain low wheat prices amid rising costs of other agricultural commodities, including sunflower oil. Concerns about declining yields in major wheat-producing nations were partially offset by Russia’s surplus, contributing to market stability.
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