Why Russian wheat is not competitive today

Egyptian GASC is holding a new wheat tender today for 8-22 August shipment. It looks like Romania and perhaps Ukraine could be the winners today. Why Russian traders are cautious sellers?

Egyptian GASC is holding a new wheat tender today, on May 24, for 8-22 August shipment. It looks like Romania and perhaps Ukraine could be the winners today. As per traders, the lowest offer from Romania is $254/mt ($7/bu) (FOB), the lowest offer from Ukraine is $260/mt and the lowest offer from Russia is $264/mt.

Russian traders are cautious sellers because of a few reasons. First, the new floating export tax kicks in on June 2 and they want to see how it will work.

Second, despite the approaching new crop Russian farmers continue to sell slowly. In fact, the most recent official data on on-farm stocks showed that wheat stocks are historically high and just marginally below 2017/18 MY when Russia harvested a record wheat and grain crop. At the same time, off-farm stocks are extremely low and in recent weeks domestic processors started to buy aggressively. As a result, domestic ruble prices have been rising quite noticeably, 12.5% wheat went up by around 1,000 rub/mt ($14/mt) since early April.

Hot and dry weather in the main spring wheat regions also could be a concern. After several weeks of dryness in parts of the Volga Valley, the Urals and Siberia the weather models still forecast minimum precipitation. 

The most recent SovEcon’s crop forecast is 81.7 MMT of wheat (85.9 MMT in 2020; USDA: 85 MMT). The new forecast will be released shortly.

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