Chicago wheat futures contract lows are not indicative of global concerns about supply, but traders may want to pay more attention to what is happening in the Black Sea area.

Winter wheat in Russia, the world's largest exporter of wheat, is in its worst condition ever. Ukraine's shipping capability could be in danger soon. Last marketing year, Russia and Ukraine exported a third global wheat.

Since the Russian invasion of Ukraine nearly three years back, Ukraine's agricultural trade has faced many challenges. Port infrastructure was a primary target for attacks. The Ukrainian grain exporters were forced to find an alternative route via Romania's Constanta Port on the Black Sea.

If elected, the frontrunner in Sunday's Romanian Presidential runoff suggested that he would stop Ukrainian grain exports from leaving his country. This move may be welcomed by Romanian farmers who previously protested against the transit of Ukrainian agricultural products to preserve local markets.

Although it is not clear whether or not this ban will be implemented, Ukraine's participation has had positive economic effects. The overall traffic at Constanta increased by 22.5% in 2023, thanks to infrastructure projects funded by the European Union.

In the worst case scenario, it would be problematic for Ukraine to lose Constanta as a market. In 2023, Constanta handled 14,000,000 metric tons (approximately 30%) of Ukrainian grain.

Ukraine's exports of wheat are expected to drop 14% in the marketing year 2024-25, which began on July 1. In the first 10 month of 2024, Ukrainian grain exports to Constanta have fallen by 52% compared to the previous year. This is because Ukraine is increasingly relying on its own ports.

The threat to Ukraine's ports will never go away, however. As of November 13, Ukrainian exporters had already shipped half the volume of wheat agreed by the government for 2024-25.

RUSSIA in Peril

On Thursday, a top Russian official said that the winter crops were in bad condition. This comes just one day after Russian analyst reported the worst winter crop health ever, using data that is not normally made public.

Officials also stated that the situation was not critical. However, a deeper look may indicate otherwise.

Analysts said that at least 37% winter crops were in poor shape compared to 4% one year earlier, which is the lowest rating ever recorded. In the average of the last five year, only 8% winter crops were in poor condition by this date.

A year ago, 74% of the crops were in good shape. This has dropped to 31%. This is the lowest percentage of crops in a good condition for 23 years.

In 2020, about 22% (or the crop) was in a poor state as early as December. It was the lowest rating in seven-years at the time.

The exact number is unknown, but the percentage of crops that were rated as good four years ago wasn't at a low for seven years, which makes it different from this season. Both years, the dry weather in fall was to blame for the problems.

It is possible that the Russian wheat harvest of 2025 has already started in a deficit. Last month, farmers said they would plant less wheat in favour of more lucrative crops such as oilseeds. According to preliminary estimates, the 2025 harvest will be similar to the 2024 level. This is a 20% decrease from the record-breaking 2022 harvest.

Wheat is a resilient plant and can survive harsh conditions, especially if the weather improves. It may be hard to convince traders that Russia will cause problems this early on.

Satellite imagery and recent weather data will provide good clues about the condition of the wheat crop in Russia once it breaks dormancy. This is regardless of the government's decision to share this information. Karen Braun is an analyst at. The views expressed are Karen Braun's.

(source: Reuters)