Wheat from the Russian Federation is becoming more expensive on world markets
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World prices for Russian wheat, which had been declining since September, began to rise. According to analysts, in November it rose in price by $9, to $239 per ton, due to the suspension of shipments due to storms in the Black Sea, reports of possible export restrictions and rising prices at tenders of importing countries. Analysts allow the trend to develop due to complications in sowing winter wheat in the European Union and a deterioration in the harvest forecast in Australia. In September, the Russian Federation already entered the top five grain suppliers to the EU – for the first time since the outbreak of hostilities in Ukraine.
World prices for Russian wheat, which had been declining since the beginning of September, resumed growth in November, according to the report of the Center for Price Indexes (CPI) of Gazprombank. According to analysts, the export price index for wheat with protein 12.5% increased by $9 over the month to the beginning of December, to $239 per ton (FOB). At the beginning of July, the first month of the season, the index was $234 per ton, and a maximum of $250 per ton was noted in September.
According to Rusagrotrans, world prices for Russian wheat with protein 12.5% on an FOB basis for delivery in December increased by $2 over the past week, to $237 per ton.
According to Sovecon estimates, quotes increased by $1 over the week, to $236–239 per ton. General Director of the Institute for Agricultural Market Studies Dmitry Rylko estimates the cost of Russian wheat at FOB at $236 per ton for deliveries in mid-January – February 2024.
As stated in the CCI report, the rise in prices was facilitated by the stop of shipments of Russian wheat in the Black Sea ports due to stormy weather at the end of November. At that time, shipping was limited in the water area and on the approaches to the ports, grain transshipment in the port of Novorossiysk was suspended (see “Kommersant” dated November 27).
Sovecon reduced its estimate of wheat exports in November by 0.4 million tons, to 3.4 million tons versus 4.3 million tons a year earlier. They note that due to the storm, traders’ activity during the week was close to zero. According to Rusagrotrans, the cost of fourth-grade wheat in the south during the week remained at the level of 11.8–12.5 thousand rubles. per ton, in the center – 9.8–10.7 thousand rubles. per ton, and estimated purchase prices in Novorossiysk increased to 15.5 thousand rubles. per ton due to an increase in the FOB price.
Positive for the market, according to the report of the Gazprombank Center for Information Center, was the increase in prices at tenders of grain importing countries.
The Algerian State Agency for Food Procurement (OAIC) purchased wheat on November 21 at $277 per ton (CIF), and the Grain Agency of Tunisia (ODC) on November 22 at $279.7 per ton (CIF).
In October, prices at the ODC tender were $10 less, the CCI report notes. Algeria, analysts say, at the end of November was the fourth importer of wheat from the Russian Federation, having doubled purchases this season, to 1.3 million tons. Wheat exports from the Russian Federation to Tunisia from July 1 to November 28 increased 1.7 times season on season, to 193 thousand tons. On December 2, Eurostat reported a sharp increase in grain purchases from the Russian Federation by the European Union – by 22% per month and 10 times per year, to 180 thousand tons. This is the maximum since March 2022; the Russian Federation has become the fourth largest grain exporter to the EU.
Wheat quotes on world exchanges have been growing over the past week, according to a Sovecon review. The March contract on the Chicago exchange rose in price by 3.8% week on week, to $220 per ton, on the French exchange – by 0.7%, to $247 per ton.
Director of Sovecon Andrei Sizov notes that the quotes could have been affected by reports about the plans of the Ministry of Agriculture of the Russian Federation to recommend a temporary ban on grain exports from Russia if reserves drop to 10 million tons.
Sovecon considers such an indicator impossible in the near future, given that as of October 1, Rosstat estimates grain reserves among producers and processors at 63.8 million tons. The prices of Black Sea wheat could also be affected by the reduction in the flow of inexpensive grain from Romania and Bulgaria – important competitors of the Russian Federation on the world market, Mr. Sizov points out.
Vice President, Head of the Analytical Department of Gazprombank Daria Snitko believes that there are grounds for a further increase in world prices for Russian wheat. According to her, the largest wheat exporting countries, with the exception of the Russian Federation, do not have large reserves, crop forecasts in Australia are worsening, and Argentina is not selling grain in anticipation of the lifting of all export restrictions.
Dmitry Rylko says that over time, complications in the sowing of winter crops in the European Union, primarily in France, where the situation with sowing and the condition of winter wheat continues to deteriorate, may become important for world prices, including for Russian wheat.
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