Russian Wheat Sellers Undercut by Europe as Ruble Strengthens


Russia is losing its competitive edge in the world’s biggest wheat market.

The country’s exporters have lost out on sales in Egypt’s last three tenders, undercut by cheaper grain from Romania, France and Ukraine as the ruble strengthens. Russia, expected to become the largest wheat exporter this season, dominated the Egyptian market for much of the past eight months.

Egypt imports more wheat than any other country and its tenders are seen as a bellwether for international demand.


Russian shipments to Egypt typically start to slow down at this time of year, but the country still has about 4.9 million tons to export before the next harvest starts in July, a record for this time in the season, said Dmitry Rylko, director at Institute for Agricultural Market Studies, or IKAR. European sellers also have large supplies to export after a record harvest in France, so competition is heating up.

“There are still plenty of sellers out there, even if Russia still has to export wheat,” said Matt Ammermann, a commodity risk manager at INTL FCStone who focuses on Black Sea region grains. Russia’s lack of competitiveness “goes back a lot to what crude oil is doing and what the ruble is doing,” he said.

Ruble Rebound

Russia is the world’s biggest energy exporter and a recovery in oil prices has boosted the value of the ruble to the highest in three months.

Weak demand in international markets means Russian wheat exporters have been reluctant to raise prices for their grain in dollars, while at the same time their costs are increasing because they buy grain from farmers in rubles, Rylko said. The squeeze has led to a slowdown in business in recent weeks, he said.

Only one cargo of Russian wheat was offered in Egypt’s latest tender Wednesday, and it was more than $6 a ton higher than winning French and Romanian offers, including freight. Spot prices for Russian wheat were at a five-year low of about $178 a ton last week, according to IKAR, still more expensive than the going rate of about $171 a ton at the French port of Rouen, according to FranceAgriMer. Quality differences between the two grains may also account for some of the French price discount.

Uncertainty about Egypt’s wheat quality requirements may still be keeping traders from making more aggressive offers in tenders, said Stefan Vogel, head of agricultural commodities research at Rabobank International in London.

Egypt roiled markets earlier this year after it rejected some wheat imports for containing the fungus ergot, and then issued contradicting statements on whether it would maintain a zero-tolerance policy or allow cargoes with trace amounts of the fungus, in line with international standards. Some traders stopped participating in tenders or raised their prices as a result.

“The EU has so much wheat sitting here and needs to ship it,” Vogel said. “But it’s still a risky thing if you’re an exporter and don’t know if the zero-tolerance policy will be applied or not.”

Source: Bloomberg



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