Russia’s wheat prices reverse, will Black Sea dryness help wheat bulls?

Last week, Russian wheat prices started to ease but dryness in the Black Sea should remain on the markets’ radar

Last week, Russian wheat prices started to reverse. 12.5% wheat closed the week at $236.5/mt FOB deep-sea ports, +$8.5 week on week but a few dollars below the values seen at the beginning of the week. Prices were going down following global benchmarks and increased competition with other origins.

Wheat in Chicago lost almost 5% and French wheat was down 1% week on week. France returned to GASC tenders with offers several dollars above Russia (C&F Alexandria) but this spread could narrow further soon. French exports are lagging badly and Algeria is expected to ease bug damage specifications allowing Russia and Ukraine to participate in its wheat tenders. This could encourage French sellers to become more aggressive in non-Algerian markets.

One of the remaining bullish stories is the dry weather in the Black Sea. Ukraine is starting the winter planting campaign and Russia has sown more than half of the area already. Many fields are dry with 0 moisture in the topsoil. September was abnormally dry, the majority of wheat regions around the Black Sea received only 20-40% of normal precipitation or lower.

Things are improving for Ukraine. The country is expected to receive 15-30 mm of rains this week which could be a game-changer for the 2021 wheat crop. However, at this stage rains are expected to move to Russia from Ukraine just marginally. Only parts of the Russian South are expected to get 10-15 mm of precipitation while other winter wheat regions are predicted to remain dry. We would be watching this closely as rains are needed very badly, indeed, in the next few weeks.

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