Wheat offers fade in Russia amid rumors on floor price

Offers of physical wheat cargoes disappeared from the Russian export market on Thursday, as talk again surfaced that the government will set an unofficial floor price of $240/mt for the country's FOB market, trade sources have told Agricensus Thursday.

The news came along with a note from industry group the Russian Grain Exporters' Union that they consider $240/mt FOB to be an "economically justified price" for Russian wheat.

At the same time, the CPT Novorossiysk price index for 12.5% was seen at RUB16,100/mt, which means the equivalent FOB price is at around $235/mt considering a tax level of around $33/mt and transshipment costs in Black Sea ports at around $25/mt.

Domestic prices have picked up since late June by around RUB1,240/mt after the basis price in the export tax formula was pushed up by RUB2,000/mt.

"Here again government wants to limit everyone to $240/mt for August, but traders resisting it, as now it is a challenge to sell at $230/mt FOB even,” a broker said.

Other sources agreed that they do not expect this to be followed strictly and for a long period, as it is not the first time the Russian government has tried to control the market unofficially, with the first “floor” price being set at around $275/mt, but then slowly dropped to $240/mt in June.

Nonetheless, offers continued to be shown below this level.

It also comes as trade sources have said that there has been a lack of firm demand in recent days and, as such, 12.5% wheat offers were placed at $230-235/mt FOB NTTK officially - close to the price floor.

However, in the event a seller finds a firm buyer at a lower level, sellers would be tempted to give further discounts, trade sources told Agricensus.

Meanwhile, Russian origin wheat remains the cheapest in the world with the price spread to the next cheapest origin - EU Black Sea 12% - at least around $15/mt.

But at the same time, Russia harvested its biggest-ever wheat crop in 2022/23, weighing in at 104.5 million mt.

Even though the export levels have also set new records, the country's wheat stocks are also huge, plus the forecast for the just-started marketing year has also come in at a high level – with ideas of crop indicated at up to 87 million mt by local analysts.

This also means that Russia is able to show record exports in the 2023/24 marketing year, in a dynamic that is known and anticipated by buyers.