During the week ending September 6, the average price for 4th class wheat dropped by 400 rubles to 12,825 rubles, according to SovEcon’s price monitoring. Since mid-August, prices have decreased by a total of 600 rubles. The rate of price decline picked up in September amidst weakening demand.
Prices are dropping amid the decrease in demand from domestic consumers and exporters. As of September 12, the amount of outstanding wheat sales decreased to 4.9 million metric tons (MMT) from 5.6 MMT a month earlier.
Domestic market purchases have slowed down due to infrastructural limitations. Port terminals are fully, or almost fully, occupied with grain.
At the same time, the wheat supply remains high amid a good crop. SovEcon estimates the wheat crop at 92.1 MMT, second only to last year’s unprecedented 104.2 MMT.
Another factor putting pressure on the domestic Russian market could be the record-high stocks, which stood at 18.9 MMT on August 1, 7% above the long-term average.
In the short term, we anticipate a decline in ruble wheat prices, which may bolster exporter profitability. However, this won’t lead to a significant rise in exports, as the primary limiting factor isn’t market conditions but infrastructure constraints.