Wheat prices near four-year lows amid ample supply and lack of demand
The Euronext wheat milling future SEP-24 contract price settled at €199.25/mt, down 3.39% week-on-week (w-o-w) at yesterday’s close, Aug. 22, 2024. At the start of the week, the euro strengthened against the dollar, nearing its highest level against the greenback since December 2023. This appreciation led to market-driven price adjustments, contributing to a decline in grain prices. However, concerns over Russian wheat export dynamics further influenced the market’s response, introducing additional volatility this week.
According to market players, from Aug. 1-20, wheat exports from Russia fell by 16% y-o-y to 3.6 million mt, versus 4.4 million mt for the same period of the previous year. An industry contact from Expana commented, “The situation was pretty similar in July, with a 22% drop compared to last year. But is it something to worry about? Probably not. Given the broader economic conditions, there’s no rush to offload excess grain quickly. Plus, the profits from grain are not even close to what you get from oil. So, there’s no need to panic.” According to market players, Russia expects to export around 6.5 million mt of wheat in August. Additionally, slight upward pressure on prices has been attributed to ongoing concerns about Russian wheat production. Persistent wet conditions in key spring wheat-growing regions have heightened these worries. The Russian Ministry of Agriculture has projected the 2024/25 wheat harvest at potentially lower levels than the estimated 86million mt, with market players anticipating a range of 82-83 million mt.
Chinese demand absence continues to be the topic of conversation amongst market players. China’s wheat purchases are expected to subside in the latter half of 2024, as an increase in domestic wheat production, and a decline in consumption, are likely to diminish the need for imports in the world’s largest wheat consumer. In recent years, China has made large wheat purchases, but this year a reduction in its buying activity is anticipated to further weigh on global prices, which are already hovering near their lowest levels in four years due to ample supply, according to industry insiders. According to China’s General Customs, the country imported about 3.7 million mt of its four major grains in July, down from 3.8 million mt in June and 5.1 million mt in May. Brazil, the US, and Australia have emerged as the main sources of these imports.
Overall market player’s current price sentiment is rather mixed, with a slight bearish tilt due to robust wheat production forecasts in the US and Russia, despite support from a weaker US dollar and poor French harvest.
Sunflower market makes rare move into contango
Sunflower oil prices have broadly moved lower in the last few weeks, according to Expana Benchmark Prices (EBP). However, Expana continues to hear of numerous trades of sunflower oil into India on a CIF (Cost, Insurance, and Freight) basis at prices around $1,015/mt. Indian buyers are looking to purchase ahead of the festival period and lock in favorable prices.
A trader commented to Expana, “I’m bullish on vegetable oils broadly, but particularly sunflower oil. The supply and demand scenario supports this view, as does the developing contango environment.” Supporting the trader’s views, most sunflower oil prices in key destinations are now in contango, meaning forward prices are higher than those in the spot market. A contango sunflower oil market is particularly rare, as the sunflower complex is typically subject to harvest pressure. This usually means that when the harvest takes place (late August to November), increased supply often causes prices to fall. Yet, forward prices for October-December, for example, are now more expensive than spot prices. This suggests, as Expana has reported previously, that this is not a ‘normal’ year due to exceedingly problematic growing conditions within the EU and the Black Sea region, which could lead to substantially reduced production.
Expana has heard production estimates of 11.6 million mt for Ukraine and 15.3 million mt for Russia for the upcoming 2024/25 season, representing potential declines of 2.3 million mt and 1.8 million mt respectively. Additionally, market players informed Expana of a significant potential reduction in sunflower seed production in Bulgaria and Romania, with expected outputs of 1.3 million mt and 2 million mt respectively. These estimates are significantly lower than the previous season when Romania produced an estimated 2.8 million mt and Bulgaria approximately 2.2 million mt.
It’s worth noting that these estimates are current as of now, and early harvested sunflower seeds “are of poor quality and lacking significant oil content.” If more of the crop is of poor quality when harvested, current estimates could be revised further downward. According to market players, this could further tighten the already thin supply levels within the market, potentially adding upward pressure to prices.
BASF says vitamin production start-up not before January 2025
BASF has announced that it does not expect start-up for vitamin E, vitamin A and carotenoid production in Ludwigshafen to commence before January 2025, after which “several months” will be required to ensure what the company describes as “business as usual”, which includes replenishments of global, regional and local inventory levels. BASF added that selected aroma ingredients will be made available first but not before October 2024, and the remaining aroma ingredients after the end of November 2024. On 16 August, BASF said it had already begun to allocate volumes to contractual customers on deliveries of selected vitamin A, vitamin E, and carotenoid products, as well as selected aroma ingredients.
BASF initially declared force majeure on deliveries of selected vitamin A, vitamin E, and carotenoid products, as well as selected aroma ingredients, on 7 August. The explosion occurred at the southern part of the Ludwigshafen site at around noon on July 29th .
Evonik’s mobile plant resumes production following fire
The investigation carried out after the explosion at Evonik’s Mobile, Alabama plant on 10 August has ended, a company spokesperson informed Expana. On 12 August, Evonik did not immediately respond to a request for comment as to whether DL-methionine production or supply was affected. However, the company spokesperson today (27 August) confirmed that the plant is “now back to full capacity of production” after final safety checks were completed last week.
The explosion, which caused no serious injuries, is understood to have been provoked by a railcar containing hydrogen peroxide that experienced overpressure.
U.S. government lists vitamins and amino acids for IPEF supply chain cooperation
The U.S. government announced on Friday, 23 August that vitamins and amino acids have been identified as key goods for potential cooperation under the Indo-Pacific Economic Framework (IPEF) Supply Chain Agreement. According to the American Feed Industry Association (AFIA), this move marks a significant step in strengthening supply chain resiliency for these essential inputs in animal feed and health. “This marks a key milestone toward strengthening supply chain resiliency by establishing a framework for deeper collaboration to prevent, mitigate, and prepare for supply chain disruptions,” said AFIA Communications Director Victoria Broehm.
This inclusion aligns with the comments AFIA submitted earlier this year, requesting that these items be prioritized. Under the IPEF Supply Chain Agreement, each participating country has developed a list of critical sectors and key goods for potential cooperation. The U.S. list includes agriculture, chemicals, consumer goods, critical minerals and mining, energy and environmental industries, health industries, information and communication technology products, and transportation and logistics. The AFIA highlighted that including vitamins and amino acids in the U.S. list underscores the importance of maintaining a resilient and diversified supply chain, particularly in light of ongoing global challenges.
The next step involves the IPEF Supply Chain Council developing action plans to enhance the resilience, sustainability, and diversification of supply chains for the identified critical sectors and key goods. These plans will address shared vulnerabilities and opportunities to build resilience among the member countries. The United States does not anticipate that all of the sectors and goods on the list will be selected for action plans, which will be decided by the IPEF Supply Chain Council, according to the U.S. Department of Commerce statement.
As the IPEF Supply Chain Council moves forward, the AFIA remains hopeful that the vitamins and amino acids sector will be prioritized in upcoming action plans to address vulnerabilities and enhance trade resilience among member countries.
Aflatoxin poisoning found in Zambian maize-based products
The Ministry of Health in Zambia confirmed that eight brands, including pet food, maize grain, and mealie meal products, have been found to contain “elevated” levels of aflatoxins. Some contaminated batches of maize meal have been recalled, and investigations are ongoing as authorities continue to gather more information. Mr. Thabo Kawana, Permanent Secretary of the Ministry of Information and Media in Zambia, stated, “Aflatoxins above acceptable levels pose a health risk to both humans and animals. In animals, high levels of aflatoxins can cause sudden death… This (the investigation) was essential as many milling companies produce products for both human and animal consumption.”
Andrew Chintala, President of the Millers Association of Zambia, confirmed to Diamond TV Zambia the contamination was first detected “over two months ago”. The investigation began in June 2024 after a public alert was raised following the sudden deaths of over 400 domestic dogs that had consumed maize-based dog food. Farm Feed, the manufacturer of the affected dog food, issued a recall statement in July for products manufactured in June.
Aflatoxins are a group of toxins produced by certain fungi or molds found on crops such as maize, cassava, cottonseed, millet, rice, sorghum, sunflower seeds, wheat, peanuts, and groundnuts.
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Written by Nick Wood
