The wheat market is in a highly complex scenario, impacted by climatic, geopolitical and economic variables. This was the focus of the Webinar “Wheat Market – Challenges and opportunities for the new harvest”, held by the Wheat Industry Union of the State of São Paulo (Sindustrigo) on Monday (10/2) and broadcast online.
The event was attended by StoneX Risk Management consultant Jonathan Pinheiro and moderated by the Supply Director of Correcta and Moinhos Cruzeiro do Sul, Maurício Ghiraldelli. In his speech, Pinheiro highlighted that wheat involves many relevant players and requires a detailed analysis of external factors to understand its price determination.
“In recent years, wheat pricing has been marked by moments of strong fluctuation, such as in 2008, during the global financial crisis, and in 2022, with the beginning of the conflict between Russia and Ukraine. Therefore, we understand that external events are important for defining the price of wheat, indicating the volatility of the grain,” Pinheiro pointed out.
Wheat Harvest Challenges: Uncertain Production and Logistical Impact
Another challenge for the sector will be the new harvest, which is already showing production uncertainties, mainly due to climate factors and logistical challenges, which affect wheat worldwide. In Brazil, the estimate is that the country will produce between 7.8 and 8 million tons of wheat, a reduction in relation to the previous cycle. As a result, imports are expected to increase, reaching 6.5 million tons.
Furthermore, competition at ports affects the flow of domestic wheat. “Brazil’s exports may decline, mainly due to competition with soybeans at the ports of Rio Grande and the logistical restrictions caused by the events of May last year, which are still affecting the terminal’s operations,” Pinheiro said. The disparity in the price of wheat bran in relation to corn is also a point that draws attention, since the price correlation, which was around 85%, is currently at 60%, to the detriment of the price of bran.
Climate impacts
In the United States, weather conditions continue to be a factor of concern. Drought could compromise spring wheat in states such as North Dakota and South Dakota, while winter wheat could be affected by the absence of a protective ice sheet. Despite this, the consultant believes that there is still room for recovery. “We will probably have a better idea of this scenario in April or May. But even if there is a crop failure, we do not imagine that it will be so significant as to define the 2025 market,” he analyzed.
Europe, one of the world's largest wheat suppliers, has been facing challenges due to above-average rainfall, which has impacted the last two harvests. However, according to Pinheiro, there are signs of recovery, and the bloc is also continuing to increase its imports.
In Argentina, the wheat harvest is also facing climate challenges. Production is expected to grow, with the 2024/25 harvest estimated at 17.5 million tons (compared to 15.85 million tons in 2023/24). This volume will allow stocks to remain stable, without significant declines. At the same time, exports are also expected to increase, reaching around 11.5 million tons (compared to 8.23 million tons in the 2023/24 harvest).
Between December and January, the country has already shipped 3 million tons, a significant volume that highlights the strong demand for Argentine wheat. One of the factors driving this market is price competitiveness, with the product arriving in China cheaper than that from Australia. If this pace continues, Brazil could face higher prices throughout the season. In addition, the country has less available exportable supply, which could affect buyer markets, including Brazil.
Russia and Ukraine: influence of war on pricing
The conflict between Russia and Ukraine continues to affect the global wheat market. Prices were recently adjusted with the reopening of the humanitarian corridor, but Russia continues to pressure the market, imposing a new price floor. “The tripod of geopolitics, economics, and supply and demand remains decisive for the wheat market. What we see on the horizon are many more bullish variables than bearish ones,” Pinheiro highlighted.
India, which has historically held strategic wheat stocks, could face a supply squeeze, which would lead to a surge in imports. If that happens, Asian demand for wheat from other sources could intensify, putting further pressure on global prices.
Global Firm Price Scenario
With several variables at play, the wheat market remains under pressure due to uncertainty. According to the StoneX consultant, the trend is for prices to remain stable or even rise. “We don’t see much room for price reductions. We would need a very large external factor to contribute to this, such as the end of the war between Russia and Ukraine or a sharp drop in consumption in China,” he concluded.
Source: Sindustrigo | Notícias Agrícolas
