Russian wheat higher again, how far are we from the season’s peak?

Andrey Sizov 29.11.2021

Last week, 12.5% wheat prices in deep-sea Russian ports rose $6 to $343/mt. The market was supported by strong demand and earlier rally in global benchmarks.

During the first half of the week, the wheat market continued to move higher but reversed sharply in the second half.

Bulls were encouraged by news from Australia which NW regions have been too rainy (30-70 mm a week) during the wheat harvest.

However, currently, the models predict drier weather. As per local sources, wet weather had some impact on quality but not on quantity. The country is to harvest another bumper crop. USDA says 31.5 mmt vs record-high 33 mmt last year and 14.5 mmt in 2019. Local forecasters are even more optimistic. Official ABARES’ estimate is 32.6 mmt while private forecasters talk about 34-37 mmt.

Outside markets put a lot of pressure on prices.

The commodities markets were sharply down on concern about the new Covid-19 variant found in South Africa.

We believe some investors are closing their long positions and taking the profit after the long rally in wheat.

The wheat demand in Russia’s ports remains strong. 12.5% wheat bids in deep-sea ports increased to 17,800-18,000 rub/mt from 16,700-17,500 rub/mt a week ago, in shallow ports rose to 15,500-15,800 rub/mt from 15,200-15,700 rub/mt.

Traders’ margins remain high and a recent decrease in transshipment fees would help them further.

Global wheat S&D remains tight and perhaps we could see higher highs during the next weeks after the end of this correction. However, we feel that bears are becoming stronger and the seasonal peak could be close or perhaps behind us.