Wheat price braces for a bumper Russia, EU, India harvest

Wheat prices have erased most of the gains made last month as investors watch the upcoming grain deal expiry. After peaking at $752 in June, the price has plunged by more than 15% to $638, meaning it has moved into a correction. 

Erdogan and Zelensky meeting

The biggest wheat news on Friday will be the upcoming meeting between the Turkish and Ukrainian presidents. Zelensky has already traveled to Turkey, where he will talk about NATO’s membership and the expiring grain deal.

Most analysts believe that the grain deal will be extended since it will be beneficial for Russia, which holds vast inventories. 

Wheat prices have also retreated because of the ongoing bumper harvest in most parts of Russia, including the North Caucasus region. The most recent WASDE report said that Russia will produce 85 tons of wheat, about 3.5 million above the previous estimate.

Russia is using wheat and other agricultural products to gain leverage as geopolitical tensions rise. Its goal is to gain market share and then use it as leverage in the world stage. As a result, there is a likelihood that these maneuvers will push the prices sharply lower.

India’s production is also rising. The WASDE report showed that India will produce 113 million tons, up by about 3.5 million tons. Further, the European Union is expected to produce 113 million tons while Ukraine’s output will rise by 1 million tons.

Therefore, the world will see more wheat supplies this year. Demand is also expected to increase. The USDA expects that global consumption will rise by 4.4 million tons to 796 million tons. The report added:

“ World trade is raised 2.9 million tons to 212.6 million, on increased exports by Russia, the EU, India, and Ukraine. Projected 2023/24 global ending stocks are raised 6.4 million tons to 270.7 million, largely on increases for India, Russia, and the EU.”

Wheat price forecast

The daily chart shows that wheat prices have been in a downward trend in the past few months. It peaked at $1,324 in 2022 and fell to a low of $568 in June and rebounded to $768.

Now, wheat has fallen below the upper side of the descending channel shown in black. It has also moved slightly below the 50-day and 25-day moving averages. Therefore, the path of the least resistance is bearish, with the next level to watch being at $568, the lower side of the descending channel.

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