Russian wheat price fall pauses after persistent drop since early January

Russian wheat export prices have been on a persistent downward trend since early January 2024, losing around $45-50/mt during the period, but it seems the fall has finally stopped, at least for a moment, trade sources said.

Selling ideas for 12.5% protein wheat have fallen to $199-200/mt free on board Novorossiysk, Taman, Tuapse or Kavkaz (FOB NTTK), a level last seen in July 2020, from $250/mt in early January, but the market appears to have found a temporary floor at this level, and bidding ideas have started to appear in the high $190s/mt or even $200/mt, with trades heard concluded in the low $200s/mt for April shipments.

Along with the fall in export prices, domestic prices have also declined but not by the same amount, falling only by around $18/mt (RUB1,600/mt) to $139/mt (RUB12,770/mt), according to the purchasing price index for Novorossiysk published by the national exchange.

Taking into account an export tax of around $36.40/mt (RUB3,344.50/mt) and transshipment costs of around $18-20/mt, this puts the FOB equivalent at around $193-195/mt, which was very close to recent offer levels.

Still, some trade sources suggest the market may still not have reached bottom and the fall could continue after some time, with ideas circulating earlier that prices could drop to around $190/mt FOB NTTK.

This comes as wheat stocks in Russia are at record levels, and although the export pace is also high, results for recent months were below the levels seen in previous years, while the current forecast for the upcoming crop is very optimistic, putting wheat output at around 92-96 million mt.

In addition, some trade sources expect Egypt’s state buyer General Authority for Supply Commodities (GASC) will return to the market for wheat either privately or through a tender process, as it skipped purchases in its last tender citing high prices shown by sellers, especially for Russian origin.

At the same time, some industry sources think that the price changes in Russia are not only related to the Russian market but also to global pressures.

“The bottom cannot be easily found by supply and demand or only with Russian cheap wheat basis, but rather with geopolitical uncertainties or Fed policies or 2024/25 numbers, plus Chinese stock building conditions,” one trader said. “I think the bottom is rather related to the changes outside Russia rather than in Russia itself.”