Slow farmer sales, strong domestic demand buoy Russian wheat prices

Posted by Marina
Even with Russia’s available wheat supply growing as this year’s harvest reaches its final stages, prices could still increse by almost a third over the coming months as a busy export order book combines with domestic demand, market sources told Agricensus on Tuesday.

The 2019/20 marketing year’s harvest hit 72.1 million mt this week, according to agriculture ministry data, with the crop harvested from 88% of the sown area.

That leaves this year’s crop on course to better the USDA’s current forecast of 72.5 million mt.

But despite the uptick in supply, prices have shown little sign of moving lower lately, as farmers hold onto their stocks and wait for better bids from exporters, a trend that analysts expect to remain the norm over the coming months.

"In the central and southern parts of Russia – the main export regions – we have already passed the bottom for prices," Andrey Sizov, Managing Director of analytical agency Sovecon, said regarding inland prices for Russian wheat.

Sovecon is expecting a “20-30% price increase" over the coming four to six months, according to Sizov.

Firmer inland prices, along with a stronger ruble, have left traders in an awkward spot, as FOB prices – those that exporters show to the international market – have slipped below the cost of origination.

At the current time, the highest official inland bids in Novorossiysk for 12.5% wheat were seen at $177.50-179/mt CPT on Tuesday, while the best-priced export levels were at $188/mt FOB for October loading.

With loading costs in Russia’s deep water ports on the Black Sea anywhere from $15-22/mt in the current market, margins on paper are non-existent.

And there is little respite for exporters, with domestic demand from feed compounders and millers in Russia also on the up and competing with exporters’ needs.

“Prices from millers are already better than export prices in some areas," a trader said.






Source: AgriCensus