By Yusuf Khan


Prices for wheat and corn have ticked higher over the last week since the explosion of the Kakhovka dam in Ukraine, however ample supplies and forecasts of record crops in the coming year are likely to keep prices in check, analysts say.

Chicago wheat futures are trading at $6.65 a bushel, 12% higher for the month, while corn is up 6% since the start of June at $6.30 a bushel. However wheat is down 16% since the start of the year, a period in which both have seen sharp losses, and prices are half of what they were directly following the invasion of Ukraine.

The reason? Forecasts are for record-high crops, offsetting nearer-term risks, so far at least.

"For now all prospects for the new crop are looking good," said Masha Belikova, grains analyst at Fastmarkets.

Earlier this month, the International Grains Council forecast output for the 2023-24 season at a record 2.294 billion metric tons of wheat, corn, soybeans and other grains with wheat in particular likely to see strong growth. The U.S. agriculture department echoed this last week saying that it expected 800 million tons of wheat to be produced this year, up from 788.50 million tons in 2022-23 and 780 million tons the year before that.

Much of this has come from higher plantings, according to Kona Haque, head of research at ED&F Man Commodities, as the spike in prices from the war in Ukraine encouraged farmers to plant more.

"We had good planting conditions and more money [for farmers] so there were more nutrients to throw at the crop," she said. In particular the higher prices encouraged plantings in the Southern Hemisphere she said for things like soybeans in Brazil, while also spurring spring planting in Europe and North America later on.

"When you get such a spike in prices you get a response," Haque said.

Next year's records are also coming on the back of huge crops in Russia and Australia in particular, where records were set last year at 92 million tons and 39 million tons respectively, according to U.S. agriculture department estimates.

Fastmarkets' Belikova said that though the crops are expected to normalize this year, with the U.S. forecasting 29 million tons from Australia and 85 million tons from Russia, both would ordinarily be considered strong yields.

There are some caveats, however.

"U.S. weather is closely monitored by the market, for the wheat and maize [corn] crop," said Megan Hesketh, analyst at the U.K.'s Agriculture and Horticulture Development Board. Major corn growing regions like Kansas have seen dry weather in recent weeks, which could reduce harvests. "A reduction in the U.S. maize crop picture could create a more finely balanced total grain supply and demand picture," Hesketh said.

Additionally, markets remain susceptible to volatility on news from the Black Sea. Prices over the last two weeks have pushed up as more bad news comes out of the Kherson region of Ukraine, even as flood waters are starting to recede following the Kakhovka dam attack.

The impacts on agriculture in the region are likely to be felt for years to come according to Kyiv-based UkrAgroConsult, mainly because irrigation systems have been destroyed. Nearly two-thirds of Kherson's agricultural land was watered by irrigation it said, meaning that until the dam is restored--which local officials have estimated may take up to five years--production is expected to struggle.

Whether the Black Sea grain deal will hold and how available Russian supplies are for export remain concerns too, Hesketh said.


Write to Yusuf Khan at yusuf.khan@wsj.com 


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06-16-23 0804ET