Weekly round-up of Black Sea grain market – July 18

Andrey Sizov 18.07.2022

This is what has happened around the Black Sea during the last week:

Russian wheat exports are picking up…0.5 mmt done last week vs 0.3 mmt a week ago. Not really impressive taking into account a record-high crop. The pace should increase substantially further but we expect to see July exports slightly below average for the month (2.6 mmt)
US & EU are tweaking their sanctions trying to assure vessels owners / banks / insurers that they won’t be sanctioned when dealing with Russian grain & ferts
Volatility in USDRUB is crazy (-6% last week; +11% a week earlier) – this makes predicting a wheat tax which now takes into account USDRUB more challenging
Russian FOB remains way too expensive….$20+ above Matift…either Matif should go higher or RU collapse. And they are booth substantially above SRW….this explains 1 mmt US weekly exports
GASC holds another wheat tender…the EU and Russia, key suppliers, are not invited. Strange to say the least. GASC has a long history of playing different games with the market – typically it doesn’t end well for them. Could they buy SRW this time to “punish EU&RU”? SRW is rallying today 5-6%
In a similar thread after the previous GASC tender we wrote ”GASC bought a record-high 815K of wheat…no idea why so much”
SRW indeed looks not expensive….not the case for the EU and especially Russia
Ukrainian exports remain modest despite the reopening of the Ukrainian Danube-Black Sea channel…0.6 mmt done in the first half of the month
Progress in talks about “Ukrainian grain corridors” – lots of optimistic comments after the meeting in Turkey; after a pause the Russian Ministry of Defense (MOD) said “its proposals were mostly supported by other parties”
The agreement could be signed this week – even if it happens will it lead to a substantial increase in Ukrainian grain exports? We still doubt that. Kremlin’s top officials for some reason lost interest in the topic – it was only MOD spokesman who commented on this
Presidents Putin and Erdogan are meeting this week in Teheran, could talk about grain again
Russian wheat yields remain high – 4.2 mt/ha (+24% YOY); Ukrainian – only 3 mt/ha (-29%)
Domestic prices are tumbling in both countries on new crop arrival and extremely slow exports in the case of Ukraine. Ukrainian S&D will be a disaster for farmers if terminals remain blocked