Experts: the world wheat market is controlled by a friendly trio – Russia, India and China

International 6 June, 2022

On Euronext, a ton of wheat delivered in September ended the week, Friday, June 3, at the level of 378 euros. Two weeks earlier, on May 16, it was trading at a historic high of 438 euros per ton. There is a slight cooling of grain prices on the European Stock Exchange, which led to a decrease in their value by almost 15%.

The same thing happened in Chicago, where on Friday the price closed the session at $ 10.40 (9.70 euros) per bushel, which is almost 20% below its peak in March. Despite this withdrawal, gold grain is still very valuable: prices have increased by almost 40% since the beginning of the year, which was caused by the invasion of Ukraine on February 24.

The evolution of the price, which is very volatile, still depends on geopolitical movements, such as weather forecasts. The changes are amplified by financial speculation. «The discussions initiated by [Russian President] Vladimir Putin on the creation of a sea corridor in the Black Sea to facilitate the export of Ukrainian grain have led to a correction in the market», – says Artur Portier from Agritel. Financial players are reselling part of their position, counting on an easier flow of 25 million tons of grain, including 7 million tons of wheat, which are still stored in Ukraine.

In mid-May, it was the decision of Indian Prime Minister Narendra Modi to ban wheat exports that blew up the markets. And this is despite the fact that shortly before he announced his desire to «feed the world» and correct the lack of a product after Russia’s invasion of Ukraine. His brutal U-turn put the markets on the wrong foot. India, the second largest wheat producer in the world after China, but with a small presence on the world trade market, is concerned about ensuring the food security of its population. However, the heat has undermined the production potential of the current crop, and inflationary pressure remains high.

Mr. Modi, however, stressed that the export contracts already concluded will be respected, and negotiations are underway with Egypt on the exchange of wheat for fertilizers. In this tense situation, everyone is wondering about the production volumes for the 2022-2023 campaign. So far, the green light is on in Russia. This year, as never before, the key role in grain trade will be played by the country led by Vladimir Putin.

After the decree on the blockade of European agricultural products in 2014, during the annexation of Crimea, the blockade, which was never lifted, Russia increased its agricultural forces and established itself as a leading exporter of wheat on the world market with 18% of volumes. The country continues to increase its agricultural capacity and is rapidly becoming a leader in the global wheat market, which is almost independently able to form product prices on global trading platforms.