Wheat prices fell in Russia’s domestic market last week again. Average 4th grade wheat prices (typical export grade, 12-12.5% prot.) were down 250 rub to 15,100 rub/mt (farm gate average price, ex.VAT). Price has dropped by around 4% from January high. 12.5% wheat bids in deep-sea ports decreased to 16,500-17,200 rub/mt from 16,800-17,500 rub/mt a week earlier (CPT) (USDRUB 74.6).
Supply is higher as farmers are selling more aggressively. Overall grain demand from processors remains low, many continue to buy minimum volumes on the endless tax news and signs of weakening domestic market. Wheat demand from exporters is muted, some exports are aggressively buying barley and corn.
In the next few weeks supply is expected to increase further after farmers digest new export tax official confirmation news (70% of the difference between the export price benchmark and $200) that hit the market on Thursday.
We remain bearish ruble wheat market short-term. CPT deep-sea port bids could fall by around 10% from the current levels. A panic sell-off could drive the market lower. On the other hand, it looks like that some larger grain exporters/terminal owners are ready to sacrifice part of the fobbing margins to get a bigger part of the export pie.
Weakening ruble prices will support wheat exports later this season. SovEcon estimates 2020/21 wheat exports at 37.9 MMT (USDA 39 MMT).
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