Russian wheat market is reversing

The wheat market is showing signs of a reversal due to diminished domestic demand for Russian wheat and increased supply.

By August 23 the average price for fourth-class wheat dropped by 175 rubles (RUB) to 13,250 RUB, according to SovEcon’s price monitoring. Over the past 12 weeks, prices have primarily risen. However, the wheat market is showing signs of a reversal due to diminished domestic demand for Russian wheat and increased supply.

From June to August, Russian wheat prices surged by 36%. Nonetheless, in August SovEcon has repeatedly alerted its subscribers to the possibility of this price growth halting soon.

The demand from the domestic wheat buyers is declining. Exporters are also purchasing less, likely having secured sufficient stocks for upcoming shipments.

Concurrently, wheat supply is on the rise. As of August 24, an estimated 61% of wheat acreage had been harvested, according to SovEcon. Additionally, SovEcon recently increased its wheat production forecast by 5 million metric tons (MMT) to 92.1 MMT.

Yet, record-high export sales might bolster domestic wheat prices. Outstanding sales as of August 28 are estimated at a record 6.1 MMT, compared to 5.4 MMT the previous month and 2.5 MMT the previous year.

Declining Russian wheat prices, alongside record-high exports, could exert pressure on the global market. Still, it’s unclear if decreased domestic prices will translate to global reductions, given the Russian government’s efforts to establish price floor for wheat exports.

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