Black Sea grains tempt Asia's buyers with low prices, but fears remain

Black Sea wheat offers have been dropping fast in the last week amid the opening of the grain corridor from Ukraine that has increased flows, while the news of record wheat production forecast in Russia has meant that offers from these origins have become the cheapest options into Asian destinations.

However, despite the prices buyers so far have been cautious to step in and make purchases.

Ukrainian 11.5% wheat offers have fallen by $30/mt during the week to $355/mt basis offers delivered CFR into Vietnam or Indonesia for September loading.

Russian wheat selling ideas were also in free fall during the same period, but the latest offers on the same basis were heard at a slightly higher level, closer to $370/mt.

But buying ideas remain well below, with levels heard at $346/mt CFR.

“For Russian origin, buyers can possibly pay a little more, since it will definitely be delivered. But only a little more. Ukrainian [prices] can go down further, since while the corridor is working it is necessary to sell and export and turn this into money,” one broker said, contrasting the situation with Russia where he felt levels had limited downside.

The pressure also comes as freight rates are at very high levels from the Black Sea, with ideas for Ukrainian cargoes delivered into Asia heard at around $75/mt, while the freight for Russian cargoes is thought to be in a range from around $55/mt to $75/mt, depending on the cargo and the fleet.

Indian or Chinese shipowners are likely to be at the lower end of the scale, but prices are much more expensive if the vessels are Greek-owned, a factor that is particularly pressing since the largest fleet is mostly European-owned, freight sources told Agricensus.

Meanwhile, most of the trade sources spoken to by Agricensus have said that, for now, they are still cautious about both origins amid the risks related - particularly the risk of cargoes not being delivered if the corridor is closed at any time by attacks or if there are further sanctions placed on Russian origin.

Importers are said to be facing financial difficulties while they are looking to resume Ukrainian imports, with some banks refusing to issue letters of credit (LC) amid the war risks.

“The problem the buyers are concerned about is that no bank, and no insurance company will agree to do for their contract if it’s done,” a Vietnam-based trader told Agricensus.

“Let the brave ones moved first. I wish to play third fiddle,” a buyer, based in Indonesia said.

Also, some buyers have said that as the price gap when compared to Australian wheat remains still relatively small, they will still prefer to take this origin, but the issue with Australian wheat is that old crop for September through December dates is booked solid, so there is a lack of volumes still available.

At the same time, Vietnam has allowed at least two Russian wheat cargoes to be imported as a test exercise after a meeting was held in the country between the Russian and Vietnamese phytosanitary agencies.

The same situation was reported in the corn market too, but buyers have been searching for more competitive price options - with competition still coming from shipments out of South America and Myanmar currently quoted in a range of $330-335/mt CFR southern ports for September-December loading windows.

A rumor circulated the market earlier this week about a cargo of Ukrainian origin corn traded to Vietnam at $300/mt CFR southern ports, with the trade said to be done between a multinational trader Viterra and Vietnam’s biggest importer Tan Long, according to market sources, but full details were hard to confirm.

The cargo was also said to be an already-afloat vessel, which could possibly explain the price possible at this level.

That rumour also came amid talks that some Ukrainian corn was sold to South Korea for September-October dates, but again details proved impossible to confirm.

However, trade sources said that deals would likely only be possible if it was older cargoes booked before the war broke out that had been expected to sail back in February, that have since been loaded in Ukrainian ports and thus could be re-sold.

But despite this, it was almost impossible to get the confirmation for new trades into Asia, while on the freight side of the market trade sources said that a few panamaxes have been fixed into that destination, and at least two were already on their way to Ukrainian ports to load.