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The current global grain market is still volatile.

According to data released by the Food and Agriculture Organization of the United Nations, global food prices hit a new high in February.

It only takes into account the impact of part of the Russia-Ukraine conflict, and the current conflict is still ongoing. Therefore, it can be predicted that this index will still be easy to rise but difficult to fall in March.

We have analyzed the impact of geopolitics on the grain market several times. However, wheat is at the forefront of this impact and may lead the grain market to usher in a new pattern.

1. Russia and Ukraine have the highest proportion of wheat exports, so they have the greatest impact

Russia is the world's largest exporter of wheat, and Ukraine has ranked among the top 5 in recent years.

Taken together, wheat exports from the two countries account for approximately 29% of global wheat exports.

According to Ukraine, it was recently stated that due to the conflict, the sown area this year may drop by more than half compared with 2021, that is, from the original 15 million hectares to 7 million hectares.

Sowing of spring wheat in Ukraine is usually in April. Affected by the conflict, 4.7 million hectares may not be sown, and the sown area will be reduced by 39%. This also means that spring wheat production may be reduced by 4 million. ton.

The country’s winter wheat harvest is expected to begin in July, but it is still unknown how much can be harvested.

As a result, in the monthly report of the US Department of Agriculture, it lowered its forecast for Ukrainian wheat exports by 4 million tons to 20 million tons.

As the world’s largest exporter of wheat, Russia’s average wheat export volume in recent years has been around 34 to 36 million tons. Also affected by conflicts and sanctions, its wheat export expectations have also been reduced by 3 million tons. tons, adjusted to 32 million tons.

2. U.S. wheat is affected by weather, and risk fluctuations increase

From the data of the past five years, the average global wheat production is about 775 million tons, and the production is mainly concentrated in China and the European Union. , India, Russia, the United States, Ukraine, Australia and several other countries. Although China and India produce more than 100 million tons, both countries are populous countries, so the export volume is not high.

When wheat exports from Russia and Ukraine were blocked, the market began to tilt toward U.S. wheat.

However, the United States has been suffering from dry weather since last year.

According to the National Oceanic and Atmospheric Administration, temperatures from the southwest to the East Coast and the north to the Midwest will be higher than the historical average from April to June, which also means that nearly 60% of The probability of continued drought in the continental United States will exceed 50%, which would also be the largest drought coverage since 2013.

Currently, more than 90% of states in the western United States are suffering from drought.

Although the planting area of ??winter wheat in the United States reached 34.4 million acres this year, the highest level in six years, continued drought has threatened crop yields.

For example, Kansas is the largest winter wheat-producing region in the United States, and the southwestern region of the state has not seen substantial rainfall or snowfall since October last year.

As of early March, more than half of the state was in drought or extreme drought, which also exacerbated the risk of fluctuations in U.S. wheat production.

3. The cost of wheat has increased significantly

In addition to the reduction in output and exports, the cost of wheat has also increased significantly.

First of all, the costs of seeds, fertilizers, etc. are high.

Affected by rising natural gas prices and other reasons, global fertilizer prices have soared last year.

In addition, Russia is the world's largest exporter of nitrogen fertilizers and the second largest supplier of phosphate fertilizers and potassium fertilizers.

Affected by conflicts and sanctions, Russia’s fertilizer exports are facing obstacles, which has made the global fertilizer market even worse.

Therefore, it is certain that the cost of planting will increase. At present, it is just a matter of how much.

The second is the increase in transportation costs.

Output and supply are one aspect, while transportation is another aspect.

As Russia-Ukraine exports are blocked, some countries have to start looking for other sources of wheat, which also means increasing transportation distances.

The current oil price is still soaring, which will undoubtedly increase transportation costs significantly and increase the cost of wheat in disguise.

As a result of the superposition of many factors, global wheat prices continue to be turbulent, and the market's reaction also confirms this.

Chicago wheat futures prices have risen sharply since the Russia-Ukraine conflict, hitting a record high in early March.

Although it subsequently fell back, it returned to the upward channel this week because it is obvious that the above-mentioned factors affecting wheat prices have not been eliminated.

Currently, the global grain market is intensifying, with wheat leading the rise in many agricultural products.

Judging from the far-reaching extent of its impact, global wheat exports and supply and demand may be the first to usher in "changes."

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