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🔥 «Bread» panic: speculators are in a hurry, but analysts are calm
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🌐 Wheat has again become a «politicized» raw material, as its price and supply logistics are strictly dependent on the development of Russian-Ukrainian conflict. If two weeks ago analysts doubted whether to buy a 20% drawdown in futures, now it is too late to do so. Market panic buys wheat in any form, as India has limited exports.
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Price went beyond the limit of exchange trading − market again became convinced of how limited global resources are and the balance in the food market is fragile. Indian government will suspend exports to ensure its food security and criticism from G7 figures will not stop it.
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Decision was made after a record heatwave caused a serious drop in crops, and India does not have sufficient reserves. Of course, such measures only complicate the situation: futures have already risen by more than 7% and retail prices − from 20% to 60%. This has already led to higher prices for banal bread, exclusive cakes, and wheat products.
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Recall: the European Commission has lowered the forecast for heat harvest in EU for 2022/23, but maintained level of exports against the backdrop of interruptions in supplies from Ukraine. In its monthly demand/supply assessment, the Commission lowered its soft wheat production forecast for the period July 2022 to June 2023 from 131.3 to 130.1 mln tons. This value almost coincided with the 2021/22 levels of 130.0 mln tons, but the real situation is already much worse than the forecast.
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Interestingly, India is not even a critical exporter − only 8th in the world according to 2021-2022. Some Indian exports are allowed at specific government requests, and supplies will also be provided to countries that have been issued irrevocable letters of credit − Bangladesh, Sri Lanka, the United Arab Emirates and Indonesia.
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India retains its reputation as a reliable supplier, but the export ban could be long-term if world food prices remain high. And the fundamental background still supports this trend.
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Profits to y’all!