Andrey Sizov
12.07.2022
This is what has happened around the Black Sea during the last week
* Russian wheat exports are gradually speeding up…SovEcon’s first July estimate – 2.0-2.6 mmt, slightly below average, 2+ times higher than June. We see growing domestic demand from exporters, farmers are ready to sell as ruble prices in ports are up thanks to the weaker ruble and lower export taxes
* Our basic scenario assumes that Russia will export 4 mmt+ of wheat in August. This should be watched – we want to see a confirmation of that to achieve almost 43 mmt 22/23 export target
* Ukraine’s exports could somewhat in July thanks to more active navigation via Danube amid the reopening of Ukraine’s Danube-Black Sea channel…note that it’s not Odesa deep-sea terminals though so don’t overestimate the impact
* Good #wheat yields in Russia after harvesting of 5+ mmt – 4.1 mt/ha (+29% YOY). Will USDA start to reflect that in their WASDE RU crop number? I believe they should as their 81 MMT looks extremely conservative. SovEcon’s new forecast should be out this week as well
* Ukraine’s wheat yield slightly improved but remained low – 2.4 mt/ha (-23% YOY), however, this is mainly South-West which suffered badly due to the lack of precipitation
* GASC bought 0.5 mmt of wheat directly from traders, Russia was #1 supplier this time….Pakistan bought the same volume but canceled the tender…wise?
* Global #wheat market is crazy…+6% one day….-4% next session. The market needed a bounce and it got it…bulls want to believe that the bottom is behind us, we are not sure. In any case, Russian FOB needs to go lower substantially
* EURUSD almost 1.0….is this one of the drivers behind strong EU sales?
* The Black Sea is gradually leaving the market’s radar. Russian troops gained control over the whole Luhansk region and continue to advance slowly in Donetsk. Russia says it will limit its military activity to replenish / allow troops to rest. Ukraine says that the war could be over in 2022. The winter wheat seeding campaign in southern Ukraine starts in the early fall
* Erdogan talks about reopening of grain corridors again (4th..5th time?)…Putin and Erdogan are expected to meet shortly in Turkey – suggest watching headlines
