Russian wheat prices hit a fresh high supported by strong ruble. What does high Russian inflation mean for the grain market?

Russian wheat prices hit a fresh high, the domestic inflation is becoming an important factor

Last week,12.5% wheat prices in deep-sea Russian ports rose $3 to $316/mt FOB, the highest level since 2012/13. The market is supported by higher global benchmarks and stronger ruble.

SRW wheat in Chicago rose 3% to $7.56/bu ($277/mt) and French wheat surged 1.4% to EUR280/mt in Paris ($326/mt). Matif wheat remained in the uptrend hitting new highs for the contract, SRW broke the downtrend last week and kept pushing higher.

Minneapolis spring wheat hit $10/bu ($367/mt) for the first time since mid-2012. Partly this is being explained by poor crops in Russia and Kazakhstan on top of the poor crop in the US and Canada. However, there is no special “spring wheat” market in Russia. Typically, the market trades here just common wheat with desired specs (i.e. protein or gluten) and there is no separate spring wheat market.

USDRUB closed last week at 69.8 (-1.2%). Russian Central Bank substantially upped the interest rate which was increased by 0.75 p.p. vs expectations of +0.25-0.5 p.p. to 7.5%. This makes Russian wheat less competitive in dollar terms. The ruble has appreciated by 4% since September. The Central Bank increased the interest rate in order to battle the rising inflation.

Annual CPI stood at 7.4% in September and food CPI – at 10.2%. Both indicators have more than doubled since September 2020. Among other things, this implies that the chance of the export tax removal or easing remains low in our view.

We expect the ruble to remain firm short term, domestic supply is expected to be limited. This will help Russian FOB to continue to move higher short term.

Follow the Black Sea grain market

Get your free trial of The Sizov Report — an analytical service covering agricultural markets of Russia, Ukraine and Kazakhstan

Try for free

More Articles for You

Russian on-farm wheat stocks are double the average

Increase in stocks can be attributed to the record-high wheat crop and relatively sluggish exports at the beginning of the export season.

Russian 2023 wheat crop estimate upped to 88 MMT

The estimate was revised up amid favorable weather conditions in the South.

Weekly Russian wheat exports decline to February low

The exports declined amid the sluggish demand at the end of the export season.

Russian wheat is being seeded at a record-high pace

Wheat is seeded at a rapid pace amid favorable weather conditions and warm temperatures at the beginning of the sowing campaign.

Russian wheat stocks are 79% higher than average – SovEcon

The stocks have significantly surpassed the average due to the record-high wheat crop and relatively sluggish exports.

Russia’s outstanding wheat sales hit multi-month low

The sales are declining amid the lower competitiveness of the Russian wheat.