New CoBank report points to the volatility in grain trade caused by the war in Ukraine, but says other crop-producing regions should be able to fill in export shortfall
The report assesses the likely duration of global grain market disruptions; what that means for prices of wheat and corn; and the implications for grain cooperatives, elevators and merchandisers based in the United States.
“We believe that grain prices will remain elevated and volatile, as markets continually assess commodity supply-demand imbalances, re-adjust risk premiums, and engage in price discovery. Such an environment will require U.S. grain cooperatives and exporters to maintain high levels of capital and excess liquidity to fund both operational and risk management activities,” the report said, adding that high fertilizer prices, crop chemical shortages and ongoing supply chain problems will add to the volatility.
CoBank said that other crop-producing regions will respond to the challenges that Ukraine faces in producing and exporting wheat and corn, but there will be a “significant tightening” in available stocks-to-use ratios for both grains.
CoBank’s forecast predicts corn available stocks-to-use ration decreasing from 6.6% in 2021-22 to 4.0% in 2022-23, and wheat decreasing from 15.0% to 10.5%, respectively.
India, Europe and Australia are expected to fill some of the expected near-term wheat export shortfall to the Middle East and North Africa, while U.S., Brazil and Argentina will fill most of the corn export shortfall. The report pointed out that India could benefit the most in the short term, as it may be able to sell some of its excess wheat stocks to Turkey, Egypt and Tunisia, where Black Sea wheat imports represent 75%, 70% and 52% of each respective country’s needs.
Russia and Ukraine account for 14% of global wheat production and 29% of global wheat exports, and 4% of global corn production and 17% of corn exports.
“The war in Ukraine serves as a ‘wake-up call’ to grain importing-dependent countries – especially those in the Middle East and North Africa (MENA) – whose food security is severely threatened due to current events. MENA nations will need to reduce their dependence on Russia and Ukraine to manage food insecurity, something that, over the long run, should benefit developed grain markets in North and South America, Europe and Australia,” the report said.
CoBank’s corn and wheat assumptions
- Twenty-five percent of Ukraine corn produced for the 2021-22 crop year, slated for export, will be lost or destroyed
- Only 50% of the expected Ukraine 2022-23 crop will be planted
- Global corn production excluding Ukraine will increase by 2.9%, equal to the 10-year compound annual growth rate
- Only 50% of Ukraine’s 2021-22 crop will get harvested during summer 2022
- 75% of Ukraine’s expected 2022-23 will be planted in fall 2022
- Global wheat production excluding Ukraine will increase by 1.1%, equal to the 10-year compound annual growth rate