Russian wheat flat, grain processors lobby for export tax

Russian export market remains relatively flat. 12.5% wheat prices in deep-sea ports declined by $1 to $253/mt. The market continues to watch the weather in the Black Sea and follow closely a discussion about potential export restrictions.

Andrey Sizov 24.11.2020

Parts of Russian wheat regions were colder than normal during the week. In some regions, minimum temperatures fell to -5-7C, in some cases to -10-12C for a short period of time. Most likely it didn’t cause any damage to plants, much lower temperatures i.e. -15-20C for at least a few weeks are needed for that. Ukraine was slightly warmer than normal, except eastern regions.

This and next weeks are predicted to be close to average in terms of temperature in the Black Sea, at this stage we don’t expect any serious bullish weather news coming out of the region short term.

More important for the wheat market was the letter which was sent to Russian PM Mishustin from all influential livestock lobbies and some food associations. The letter suggested reintroducing an export tax for wheat instead of the quota. There was 0 reaction in global markets to this letter while we believe that the probability of this scenario is far from negligible (see an earlier Ad Hoc note).

It seems that more Russian farmers are starting to consider selling their stocks. Ruble prices are just marginally below record-high levels and there are more and more export restrictions talks. Substantial appreciation of the ruble, if it happens, also could encourage some to sell at current levels.