Prices for Russian wheat rose steadily last week. Export quotes for wheat with protein 12.5% strengthened by 2.5% to $245/t FOB, bids in ports – by 6% to 14,300-14,700 rubles / t (ex. VAT) (USDRUB = 73.8). The market rose on the background of earlier strengthening of world prices, reduction of export taxes and slow sale rate by farmers.
In the first week of July, wheat prices in Paris fell below €200/t. Prices climbed to €218 last week amid harvest delays in France and Germany due to rains and continued extremely dry weather in the major wheat regions of North America.
The export duty on wheat has been declining in recent weeks. On Friday, the duty was cut again to $ 31.4/ton. A month earlier, its rate reached $41.3/t.
New crop sales are slow. Sellers in the Russian South are in no hurry to part with grain, waiting for higher prices. Several large traders started to up the prices quickly in the second half of the week, and other buyers had to follow. As usual, after such rapid growth, many farmers stopped selling and many defaulted on existing contracts. As a result, prices in the South jumped by 700-1000 rubles / ton. Farmers in the Volga region and in the Center also raised prices following the southerners.
In the short term, SovEcon expects continued growth in the domestic market. Strengthening of the ruble prices is likely to slow down exports during the next weeks. SovEcon estimates wheat exports in July at 1.8 mmt (-23% YOY) which is the lowest number since July 2017.
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