Wheat higher on weather, export restrictions

Last week, wheat in Chicago rose 5.1%, closing on Thursday at $8.15/bu ($299/mt). French wheat climbed to €290.25/mt ($329/mt; +4.2%).

12.5% wheat prices in deep-sea Russian ports decreased by $1 to $334/mt, in shallow ports – by $4 to $306/mt.

Argentina and the southern states of Brazil remain drier than normal supporting corn and soybeans’ markets. The forecast remains dry.

Argentina’s government introduced a 41.6 MMT corn quota and 12.5 MMT wheat quota for 20/21. USDA estimates the country’s exports at 39 MMT and 13.5 MMT.

Talks about Ukraine potentially restricting milling wheat exports at 4 MMT in 1H 2022 were also supportive. We believe, that in reality even if Ukrainian authorities will modify the export memorandum the impact on exports will be limited if any (see a separate report).

Chatter about active Chinese wheat imports also helped bulls.

Bears are watching the finish of the record wheat crops in Argentina and Australia.

The outlook for the new crop in the Black Sea remains good, as per SovEcon’s assessment. SovEcon released publicly its new 2022 crop forecasts. New Russian wheat crop estimate has been upped from 80.7 MMT to 81.3 MMT on good crop conditions across the country. Ukrainian 2022-wheat crop estimate was upped by 2.0 MMT to 29.1 MMT on a larger area and better conditions.

Russian quota draft decree has been published last Friday. Wheat quota is to be set at 8 MMT, more or less in line with expectations, corn and barley – at 3 MMT, below the expectations. The grain export taxes are to be revised higher in case of stronger export prices ($375+ for wheat). (See a separate report).

USDRUB is traded at 73.6 (-0.8% WoW). The ruble is supported by sales of USD for payment of the taxes and dividends but Russia-West/Ukraine tensions definitely remain on the agenda.

Russia upped its weekly wheat export tax by $0.9 to $94.9/mt based on the $335.6 price index.

Bids in ports were mostly flat.

12.5% wheat bids in deep-sea ports were in 16,400-16,800 rub/mt range compared to 16,200-17,000 rub/mt a week ago, in shallow ports went up to 14,300-15,200 rub/mt from 14,300-14,600 rub/mt.

We remain bearish wheat but continue to watch Russia-Ukraine tensions closely. The persistent dryness in South America also should be monitored.

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