Equity Analysis /

Thailand: Agro & Food - Russia-Ukraine grain export deal to dampen SB price

  • Russia-Ukraine signed UN-backed grain export deal in July

  • Overall 2022/23 US crop condition rated as good

  • USDA’s Jul report—a marginal drop in 2022/23 global stocks

Bualuang Securities
27 July 2022

Apart from the USDA’s forecast of YoY bigger US and global soybean (SB) production and stocks in 2022/23, we think that the market will now focus more on the Russia-Ukraine grain export agreement signed on Jul 22, which will negatively impact the prices of SB, other grains and all vegetable oil products. In light of this, we estimate the global SB price is likely to drop to a US$13-15/bushel range in 2H22, which will make TVO’s GM highly volatile in 2H22. Our HOLD rating stands on TVO for a 7% dividend yield.

Russia-Ukraine signed UN-backed grain export deal in July

On Jul 22, Russia and Ukraine signed separate agreements with Turkey and United Nation (UN) to allow grain exports from Ukraine’s Black Sea ports along with Russian exports of grain and fertilizers. The agreement is valid for 120 days and may be automatically renewed without further negotiations. The deal will enable Ukraine to export 22m tonnes of grain and other agricultural products which have been stuck in the Black Sea ports due to the war. This should ease the global food crisis, the global supply chain disruptions and the price-inflating situation of global grain (wheat, barley, SB, rapeseed and corn) and vegetable oils (palm oil, SB oil, sunflower oil and canola oil) after the war has started.