Crops slip to end volatile week as supply outlook remains opaque

Wheat and corn slid in Chicago, closing out a back-and-forth week for prices as the war in Ukraine leaves traders parsing an increasingly unclear supply outlook.

Futures have flipped from gains to losses for six straight sessions. Officials in Russia are giving little indication that its invasion of Ukraine will end imminently. Although some grain cargoes are still flowing from the Black Sea, the pace that will be maintained going forward is unclear. Chinese leader Xi Jinping assured U.S. President Joe Biden during a highly anticipated videoconference Friday that his country didn’t want war in Ukraine, according a report from state-run Xinhua.

Stockpile data, historically the best indicator of global grain supplies, are becoming a less useful barometer of what’s available for sale. The International Grains Council on Thursday raised its outlook for inventories—usually a bearish sign. However, that’s not from a sudden swell in harvests, but from crops stuck in silos across war-torn Ukraine.

“The war has effectively created a tsunami across world grain markets,” consultant Strategie Grains said Thursday in a report. “Almost overnight, around 25 million tons of exportable grain has disappeared from the world market for the 2021-22 season.” 

Wheat futures in Chicago sank 2.9% to $10.6675 a bushel as of 10:40 a.m. local time. Corn also dropped 1.7% to $7.42 a bushel, after climbing more than 3% the prior day. Soybeans traded 0.8% lower after rising slightly earlier in the session. 

“Over the last three weeks, crops have struggled to hold gains going into the weekend in case peace happens,” said Arlan Suderman, chief commodities economist at StoneX.

Grain can be stored for a lengthy period, and some Ukrainian crops could eventually still be shipped abroad. That timing hinges on the length and severity of the war. The IGC cut its global trade outlook by 9 million tons for the current season, saying rising sales from other producers can’t fully offset Ukraine’s losses.

The country’s spring sowing period is also fast approaching, crucial to determine the coming corn and sunflower crops. Growers will plant as much as possible, although yields may fall by a quarter, according to Agriculture Minister Roman Leshchenko. Farmers are facing damaged infrastructure and shortages of fuel and other inputs. 

“Potential damage to port facilities, railroads and storage silos could impact shipments over the longer term,” IGC said. “Access to some fields is currently impossible.”