Russian wheat prices hit July lows amid high supply, weak demand

Russian wheat export prices fell to their lowest since early July as weaker domestic prices, high supply and sluggish demand weighed on sentiments, consultancy agency SovEcon said. 

Last week, free-on-board (FOB) prices for the 12.5% protein wheat declined to $228-$230 per metric tons, falling by $4, the agency said in its latest update. 

From mid-August to early September, Russian wheat export prices experienced an unexpected and significant decline of $11 per metric ton. 

This particular drop in price is noteworthy because it deviates from the typical seasonal trends observed in the global wheat market. 

Historically, wheat prices tend to reach their lowest point, or "bottom out," during the July-August period, following the harvest season. 

The recent descent in prices, extending into early September, suggests a departure from these established patterns, indicating potential shifts in supply-demand dynamics or other influencing factors within the Russian wheat export sector. 

This unusual market behavior warrants further analysis to understand the underlying causes and potential implications for global grain trade.

Declining wheat prices impact Russian exports

Recent trends in the global wheat market have seen a significant depreciation in Russian domestic wheat prices, directly influencing export values. 

This downturn can be attributed to a confluence of factors, including robust domestic supply and shifting international demand dynamics.

Specifically, between mid-August and early September, the price of Russian 12.5% protein wheat experienced a notable decline, falling by 575 rubles per metric ton (equivalent to approximately $7 per metric ton), according to SovEcon. 

This pushed the price down to 14,000 rubles per metric ton, which translates to approximately $174 per metric ton. This reduction in domestic prices suggests a potential surplus of wheat within Russia, leading producers to lower their asking prices to stimulate sales.

The impact of these weaker domestic prices is particularly felt in the export market. 

As domestic prices fall, it becomes more challenging for Russian exporters to maintain previous price points, leading to a decrease in their export competitiveness. 

SovEcon said:

In September, SovEcon raised its Russian wheat production forecast by 0.7 mmt to 86.1 mmt. A year earlier, Russian farmers harvested 82.6 mmt.

Global demand 

Demand from major importers is currently weaker than last year. 

According to SovEcon, Russian wheat exports in the first two months of the new season totaled 6.4 million metric tons, significantly lower than 9.9 million metric tons a year earlier and below the five-year average of 8.1 million metric tons. 

Specifically, shipments to Egypt during this period were 1.1 million metric tons, a decrease from 1.5 million metric tons last year.

From mid-August to early September, global market dynamics led to a decrease in Russian wheat values, the consultancy said. 

French soft wheat prices on Euronext fell by €6.25 per metric tons ($7/mt) to €189 per metric tons ($221/mt). This downward trend in wheat prices was mirrored in the US, Bulgaria, and Romania.

“Falling Russian wheat prices remain a key bearish factor for the global market,” Andrey Sizov, managing director at SovEcon said.