Column by Anatoly Kostyrev about attempts to influence the price of wheat

Talk of Russian dominance in the global wheat market appears to have given some market participants and regulators increased confidence in their own capabilities. This, it seems to me, can explain the results of Russian wheat exporters at the latest tenders of the Egyptian state-owned company GASC.

Since the end of August, traders have been steadily offering GASC wheat from the Russian Federation at $270 per ton (FOB) and have been consistently losing out to the cheaper alternative from Europe. At the tender held on September 27 with delivery in November, the Egyptian company again ignored 18 offers to purchase Russian wheat at $270 per ton, contracting two shipments from Romania and one from Bulgaria at $255 per ton. According to Sovecon, by the end of the last tender, some traders still reduced the price to $260 per ton, but this did not bring results.

Traders, as is believed in the market, set the price of $270 per ton on the recommendation of the Ministry of Agriculture. The Vedomosti newspaper wrote about the discussion of an informal “price threshold” at a meeting in the ministry in the summer, and the publication’s interlocutor explained the idea as a desire to support prices on the domestic market. The Union of Grain Exporters indicated that they stand by their prices, which are due to the growing cost of wheat production. It is more profitable to skip some tenders than to discount and sell Russian wheat at any price, the association assured.

In the meantime, the effect of fixed prices is the opposite. Due to the reduction in the number of new contracts, demand for wheat from exporters decreased, some suspended purchases, and wheat prices on the Russian market went to a peak. ProZerno, in its monitoring, cited by Interfax, called last week’s price collapse “devastating.” According to the agency, third- and fourth-grade wheat in the south fell in price by 1.1–1.3 thousand rubles, to 13.3–14.5 thousand rubles. per ton. Sovecon noted a decrease in prices in the center to 12 thousand rubles. per ton, the minimum since the end of July. “Taman, Novorossiysk, everything has stopped. There are no applications, or the price is nothing at all,” share participants in one of the industry chats on Telegram. The participants in the discussion do not understand how there will be record exports under such conditions. “What are there, bottomless warehouses in the ports?” – one of them asks.

But market participants, apparently, are not going to retreat yet. The Union of Grain Exporters cited Rusagrotrans’ forecast about the expected increase in wheat purchases by large importers, which should lead to higher prices. “The bullish trend continues for all grains.” The only questions that remain are: when and for how long?” — the union assures readers of its Telegram channel.