Negative trading margins ensure that Russian loading discounts persist

Loading discounts in Russia’s deepwater ports are expected to remain in place as terminal owners try to attract grain exporters that are struggling with negative margins, an analyst said Tuesday.

Russia’s wheat market has been stuck in an unusual situation where inland prices are higher than exports, which costs companies money as they struggle to cover short positions with expensive parcels.

“The grain market is becoming a market of terminal traders,” Dmitry Rylko, general director of analytical agency IKAR, told delegates at the Global Grain Geneva on Tuesday.

Prices for Russian 12.5% are around $207-208/mt FOB for November loading, while official bids in the inland market are around $193-195/mt CPT – offering little or no margin when loading rates are added.

Earlier this marketing year, terminals in the Novorossiysk grain export hub started to offer discounts, in an attempt to retain existing business and attract new customers.

Loading rates that are typically $23-24/mt in a normal year, presently can be as low as $15/mt, traders told Agricensus.

But Rylko said terminal owners are unlikely to discount further in order to offset further trading losses, saying that the terminals will lose money if loading costs drop below $12/mt.