The global grain market is ending a protracted downward cycle and is preparing to enter a pronounced upward phase, creating new windows of opportunity for major exporters.
Speaking at the prestigious «Where the Margins Are,» conference organized by the Institute for Agricultural Market Studies (ICAR), Dan Basse, president of AgResource, a leading American analytical agency, presented a detailed medium-term forecast for the sector’s development.
According to the expert, after two and a half years of dominant negative price trends, global prices for basic grains and oilseeds are returning to growth.
Nevertheless, the realization of these positive forecasts for the domestic agricultural sector will require overcoming significant infrastructural and geopolitical barriers.
Double trigger: military risks in the Black Sea Region and the El Niño climate factor
The new surge in food prices on global markets is due to the confluence of several fundamental factors, including Basse’s geopolitical tensions and severe weather anomalies.
Geopolitical Pressure.
The duration of the Russian-Ukrainian conflict and the escalation of the US-Iranian standoff are powerful inflationary triggers.
If these clashes drag on until the fall or the end of this year, grain prices will experience a strong upward impulse.
Logistics Force Majeure.
The systematic damage to port infrastructure and merchant vessels in the Black Sea region is a serious concern.
AgResource fears that these threats could reduce total exports from the macroregion by a third or even half.
Right now, the international market is acting short-sightedly, failing to factor in significant risk premiums for fulfilling export contracts in Russian and Ukrainian ports.
If attacks on the civilian fleet continue, global exchanges will react with an immediate, explosive price surge of 30-80%.
El Niño Climate Factor
This natural phenomenon could critically reduce global supplies of palm oil, wheat, and corn.
Drought has already severely impacted crop yields in the US and several European countries, while excessive moisture is being recorded in the Black Sea region. AgResource is reducing its global grain production forecast by 2-3% compared to last year.
Record demand and a price target of $270 per ton FOB
While gross harvests are falling, global grain consumption, on the contrary, is expected to reach a historically high.
The global carryover stocks-to-consumption ratio could fall to a critical 14.4%.
This would be the second-lowest level in modern history, following the 2007 food crisis (13.6%), serving as a powerful fundamental factor supporting the bullish wheat market.
Balance sheet mathematics allows Dan Busse to predict that wheat export prices relative to Russian offers could easily reach $270–280 per ton FOB.
The investment cycle low for wheat remained at last year’s low, while the corn and soybean markets bottomed out in June.
The window of opportunity with high prices will last for a year or two, after which, closer to 2028, the market may return to a bearish decline.
Conclusions: logistics vise for domestic agribusiness
The paradoxical conclusion is obvious: the world is entering an era of expensive grain, but Russian farmers risk losing out and missing out on these excess profits due to severe domestic logistical constraints.
The recent blockage of civilian shipping through the shallow Azov-Don Canal has left only the deep-water ports of the Black Sea, the Baltic, the Caspian Sea, and rail for bulk shipments to foreign markets.
However, quickly redirecting millions of tons of raw materials there is extremely difficult.
Under these conditions, government initiatives to salvage the sector’s margins are critical.
The Ministry of Agriculture’s proposal to subsidize 90% of the cost of rail grain transportation from the Rostov Region to ports on the Black and Baltic Seas, including compensation for the return of empty railcars, is a viable tool for eliminating local surpluses and protecting domestic procurement prices from collapse.
