Wheat extends rally as weather worries add to export woes

Wheat futures headed for the biggest two-day rally in a month as weather worries and export challenges risk keeping global supplies tight. 

Only 30% of the U.S. winter-wheat crop is in good or excellent condition, the Department of Agriculture said Monday in its first national ratings of the year. That’s the worst score for this point in the season in data spanning three decades. Parts of Europe are also facing spring frosts or snow, according to Paris-based adviser Agritel. 

Weather concerns there come as global grain supplies are already constrained by Russia’s war in Ukraine. Some Ukrainian crops are being shipped out of the country by rail and road, but the flows are much smaller than traditional export routes by sea, UkrAgroConsult said in a note. 

“A full recovery of exports will only take place after the Black Sea ports are unblocked,” the Kyiv-based analyst said. “The grain export potential under the current conditions is limited to 1 million tons per month,” fivefold lower than normal.

Wheat futures on Tuesday rose 2.9% to $10.3925 a bushel. That puts prices up almost 6% so far this week. Corn increased 0.9% after a 2.1% gain on Monday, buoyed by the U.S. government reporting an export sale to China of more than 1 million tons.

In addition, the U.S. said it may impose further penalties this week on Moscow, and European nations are discussing the possibility of extending sanctions to Rusisa’s oil and coal sectors as mounting civilian casualties in Ukraine pile pressure on governments to do more. 

Agricultural products haven’t been directly targeted by sanctions. Russia is one of the world’s biggest wheat suppliers and still shipped a significant amount abroad in March. Still, its grain-export union has cited restrictions with logistics, insurance and payment for Russian supply. 

Ukraine’s grain association is asking the government to scrap licensing restrictions on wheat exports to restore shipments, it said Tuesday. All eyes will be on the planting pace of its corn and sunflowers in the weeks ahead. The agriculture ministry expects about 3.5 million hectares (8.6 million acres) can’t be sown due to the war.