Russian wheat export prices were largely unchanged last week, and analysts say that prices have reached the bottom as farmers are reluctant to sell due to a sharp fall in profitability.
The price of 12.5% protein Russian new crop wheat scheduled free-on-board (FOB) with delivery in late August was $220 per metric ton at the end of last week, up $1 compared to the previous week, according to the IKAR consultancy.
Sovecon put the price of wheat with the same protein content for nearest delivery at $220-$222 per ton at the end of last week, similar to the week before.
“We believe there is a high chance that Russia’s FOB has bottomed out. It has been flat for a few weeks, demand from exporters is rising, supply in the current season will be substantially lower, and it tends to find a bottom in June-July”, Sovecon said in a weekly note.
Falling profitability of wheat production even in the southern regions of the country, and negative profitability in a number of other regions, are forcing farmers “to demonstrate confident resistance to sales at current prices”, said IKAR head Dmitry Rylko.
Russia is the world’s largest wheat exporter. Its exports increased to 1.0 million tons of grain last week from 0.71 million the week before.
Shipments included 0.76 million tons of wheat, up from 0.66 million tons a week earlier, Sovecon wrote, citing port data.
Sovecon raised its wheat export forecast for July by 0.3 million tons to 3.2 million tons, compared to a record 4.5 million tons a year ago.
The agency late last week also raised its 2024 Russian wheat crop forecast to 84.7 million tons from 84.2 million tons, thanks to relatively high yields in the Volga regions and southern Russia, as well as further improvement in weather conditions in Siberia and the Urals.
According to Rylko, IKAR is still maintaining its forecastof wheat harvest in Russia, noting that precipitation may seriously hamper harvesting in the Volga regions, which have so far shown very high yields.
“As we feared when we warned a few weeks ago, the weather is starting to hamper harvesting in the Volga region, especially in its eastern part,” he said.
Russia started harvesting several weeks early due to weather conditions. As of July 23, Russian farmers had harvested 48.7 million tons of grain against 23.9 million tons a year earlier, from 14.0 million hectares, up from a previous 6.1 million hectares.
The average yield was 3.49 tons per hectare, down from 3.89 tons a hectare the year before.
The wheat harvest totalled 42.2 million tons from 11.6 million hectares, up from 18.8 million tons from 4.8 million hectares, with an average yield of 3.63 tons per hectare, versus 3.95 tons, Sovecon said.
Source: Reuters