Andrey Sizov
07.09.2021
Prices for Russian wheat with 12.5% protein at the end of last week have strengthened by $3 to $ 301/mt FOB deep-water ports, as per SovEcon’s assessment. This is the highest price level since April 2014.
Since July, prices have already risen by more than $50/mt against the background of deteriorating new crop prospects in Russia and Canada. An additional factor is a rise in domestic prices and the effect of poorly predictable export tax.
Since June, the prospects for a new wheat crop in the Northern Hemisphere began to deteriorate rapidly. Much of the Russian crop has been affected by dry and hot weather. An equally important factor turned out to be the reduction in area under winter wheat, which became known only in July.
Since June, SovEcon has begun to actively cut the estimates of the new Russian crop. In June it was estimated at 84.6 million tons, and by the end of August, this figure dropped to 75.4 million tons. The USDA cut the estimate of the new crop more radically. In June, his forecast was a record-high 86 million tons, and in August – already 72.5 million tons.
This season was also extremely dry for Canada. The new wheat harvest is estimated by the USDA at 24 million tons against 32 million in June. The country’s Statistics service last week estimated the new harvest at 22.9 million tons, 35% less than last year.
Prices for Russian wheat were also supported by the active strengthening of ruble prices, which have soared by about 3,000 rubles/ton (USDRUB 73) since mid-July.
An additional impact on export prices is also exerted by the weekly-adjusted tax, which actual rate is hardly predictable. Exporters have to reflect the additional risk in the price.
Further rise in prices for Russian wheat is questionable. Wheat prices from other regions have dropped markedly in recent weeks, and Russian wheat is losing its competitive edge.
