Wheat prices on the Russian market are falling sharply

The rate of decline in grain prices on the Russian market is accelerating. According to Sovecon estimates, over the past week, wheat prices have fallen on average by 250–425 rubles, to 12.4–13.5 thousand rubles. per ton. Analysts talk about weak demand from traders, importers and infrastructure restrictions, while exporters attribute the dynamics to a seasonal increase in the supply of inexpensive grain.

According to Sovecon, on the Russian market, third-class wheat with pick-up based on the results of the week of September 11–15 fell in price by an average of 250 rubles, to 13.5 thousand rubles. per ton, the fourth – by 425 rubles, up to 12.4 thousand rubles. per ton. A week earlier, quotes dropped by 125–400 rubles. per ton. According to Rusagrotrans analysts, published by the Pole.RF resource, prices for third-class wheat on average per week in the south decreased by 900 rubles, to 12.88 thousand rubles. per ton, the fourth – by 690 rubles, up to 12.26 thousand rubles. per ton.

Wheat is becoming cheaper due to weak demand from exporters and local consumers, Sovecon notes.

Analysts cite market participants who talk about difficulties in obtaining railcars, and some exporters say they have accumulated stocks sufficient for several months of deliveries. Rusagrotrans points to overstocked ports and sagging demand from importers. According to Sovecon, purchase prices for wheat with 12.5 percent protein in deep-sea ports dropped from 16 thousand to 15.1–15.6 thousand rubles over the week. per ton. The purchasing price index of the Union of Grain Exporters in deep-water ports from September 8 to 15 decreased from 15.57 thousand to 14.77 thousand rubles, in low water – from 13.51 thousand to 12.01 thousand rubles. per ton.

Sovecon director Andrei Sizov does not rule out that exporters expect a further reduction in prices on the domestic market to resume purchases. According to him, in the short term there are prerequisites for this. The reserves are large, the new crop is starting to hit the market en masse, and agricultural producers need to free up storage capacity for later crops, the expert explains.

General Director of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko says that there are difficulties in concluding new contracts at the proposed prices.

ICAR estimates the average cost of Russian wheat on a FOB basis at $235 per ton. According to Sovecon, prices for Russian wheat for the next week’s delivery decreased by $3, to $244–246 per ton (FOB). As Andrey Sizov notes, in the context of rising quotations on world exchanges, the sluggish decline in global prices for Russian wheat will apparently stop. According to him, now wheat from the Russian Federation on FOB is at the level of Romania and Bulgaria, and the competitiveness of the Russian crop has increased.

Dmitry Rylko adds that importers are also waiting for clarification of the situation with the supply of 1 million tons of grain to Turkey and are monitoring the Ukrainian grain channel. Ukrainian authorities, after stopping the grain deal, announced a temporary trade corridor for ships, including the ports of Chernomorsk, Odessa and Yuzhny. On September 16, Minister of Infrastructure of Ukraine Alexander Kurbakov announced on social networks that two ships were moving towards Ukrainian ports to load almost 20 thousand tons of wheat. As Andrey Sizov notes, growing tensions in the Black Sea in connection with these reports may affect the market in the near future.

Chairman of the Board of the Union of Grain Exporters Eduard Zernin points out that now is the peak of domestic supply, when agricultural producers have finished harvesting wheat and are dumping the surplus, usually not of the best quality, at any price, including to free up storage capacity for other crops of a later harvest. And excess supply puts pressure on prices on the domestic market, he notes. Mr. Zernin does not see a decrease in demand from exporters. “Grain exports have been setting historical records for several months now,” he reminds. On the foreign market, Eduard Zernin believes, exporters managed to break the trend of sales of Russian grain at a discount to their main competitors, and current prices are due to the growing level of costs in wheat production.

Anatoly Kostyrev