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What future awaits wheat prices?

Какво бъдеще очаква цените при пшеницата?
Recent years have proven that long-term forecasts are mainly wishful thinking and can be reversed at any moment. But in this case, we pay attention to the prediction made by David Roche - the man who went down in history for correctly predicting the Asian financial crisis in 1997 and the global financial crisis of 2008.

Contrary to market sentiment, Roche, president and global strategist at Independent Strategy, expects a 13-15% annual increase in wheat prices over the next two years.

"The logic is simple. Future supplies from Russia are at great risk, we have a warming climate in general that we can see reducing water levels in key arteries like the Mississippi, which carries 60% of US grain to the ports where it goes overseas, so that we can expect all kinds of disruptions that we haven't even imagined from climate change," he told CNBC.

His comments come as wheat prices remain down about 29% year-to-date and near their lowest levels since September 2020. Corn prices are also trading near three-year lows, while soybeans recently hit four-year highs. bottom.

The price declines were boosted by the US Department of Agriculture's report of higher production and inventories than analysts had expected. Apart from the report, pressure on the market continued on the news that Ukraine was able to find alternative export routes despite Russian attacks on its ports.

Ukraine's deputy prime minister said on Sunday that five more ships were traveling to Ukrainian seaports through a new corridor opened mostly to agricultural exports, an alternative to the Black Sea grain deal that Russia left in July.

However, Roche remains bullish on his forecast, saying there are additional factors that could push prices higher.

For example, a critical stretch of the lower Mississippi River fell last week to within a few inches of its lowest level, according to the U.S. National Weather Service, and is expected to remain low as the country prepares for its busiest grain export season .

"That, along with instability in Russia and El Niño, are three factors that I think will disrupt supply in grain markets," Roche said.

The specialist expects yields to suffer from higher global temperatures and the El Niño weather pattern, which typically lasts about four years, and suggests global grain supply will be constrained by the Russia-Ukraine war, which will last at least until 2024. and possibly until 2025.

The cumulative effects of these weather and geopolitical risks will cause the wheat stock-to-use ratio to decline by about 5% per year by the end of 2025, according to Roche, leading to a 13-15% annual increase in wheat prices.

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