Last week, 12.5% wheat prices in deep-sea Russian ports rose $2 to $303/mt, the new seven years high. Russian wheat continues to lose its competitive edge but hardly predictable export tax doesn’t allow exporters to lower prices.
Russian weekly wheat export tax was upped again, from $46.5/mt to $52.5/mt ($275 price index). The index remains a big unpredictable variable for the prices, implying bigger risks for exporters that they need to reflect in the price. In theory, the tax index should continue to rise at a fast pace.
GASC held another tender and showed that it’s ready for the current prices. The state firm bought 300K of wheat. Ukraine is becoming an aggressive seller; the country will supply 240K of wheat at $310-313 FOB + 33-34 freight. Russia sold 60K at 316.5 FOB + strangely low freight of $27. At the previous tender, GASC bought 180K at $304-309 FOB.
Ukraine is likely to remain an aggressive wheat seller in the nearest future. The country has finished the harvest of the new record-high crop. SovEcon estimates it at 31.7 mmt, almost 7 mmt above the previous year.
On Friday, USDA kept its Russian wheat crop estimate unchanged at 72.5 mmt. The most recent SovEcon’s publicly available forecast is 75.4 mmt.
We expect the global wheat market to be relatively flat/move lower. Russia needs to lower its prices to compete with other origins.
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