Bids for Russian 12.5% protein content wheat, intended for export from deep-sea ports, dropped last week for the first time since the middle of February, SovEcon estimates showed.
The price range narrowed and shifted downwards, settling at 17,300 to 17,800 rubles per metric ton.
This adjustment follows the preceding week’s broader range of 17,500 to 18,000 rubles per metric ton.
The decrease suggests a potential easing in the price of this specific wheat variety within the Russian export market.
SovEcon said:
The price drop was driven by exporters lowering purchase prices.
Russian wheat exporters have been actively employing strategies to reduce their purchase prices, aiming to bolster the profitability of their operations.
This comes as a response to a challenging market environment that has, in recent months, seen exporters grappling with negative profit margins.
The persistent efforts to lower purchase prices reflect the exporters’ determination to navigate these difficulties and restore their businesses to a profitable position.
Supply rises
As the Northern Hemisphere transitions into spring, the availability of the grain has seen a slight uptick.
This increase can be attributed to agricultural producers across various regions who are wrapping up their harvests and finalising their strategies for the upcoming planting season.
Factors such as favorable weather conditions in certain areas and the anticipation of increased demand as warmer months approach may also contribute to this marginal rise in grain supply.
The downturn in purchase prices coupled with the notable increase in profitability has provided a much-needed boost to export sales, breathing new life into the sector and reinvigorating overall business operations.
The sales volume for Russian wheat contracts experienced a significant increase in the past week.
The total volume rose to 1.4 million metric tons, marking a substantial jump from the 1.1 million metric tons reported the previous week.
This surge in contract activity indicates a growing demand for Russian wheat in the global market.
Exports may not rise sharply
However, a significant increase in export volume is not expected in the short term.
Several factors contribute to this projection. Market conditions may not be favorable for a sudden surge in exports.
Additionally, there could be limitations on production capacity or challenges in logistics and supply chain management that could hinder a rapid expansion of export volumes.
Furthermore, changes in government policies, fluctuations in exchange rates, or the emergence of new competitors in the global market could also impact the ability to significantly increase exports in the near future.
Export estimates
SovEcon predicts that Russia will export 1.5 million metric tons of wheat in the specified period.
This figure represents a significant decrease compared to the 4.8 million metric tons exported during the same period in the previous year.
Furthermore, it falls substantially below the five-year average export volume of 3.3 million metric tons for the same timeframe.
These estimates highlight a notable decline in Russian wheat exports, which could have implications for global wheat markets and food security.
“In February, SovEcon assessed Russian wheat exports for the season at 42.2 mmt,” Andrey Sizov, managing director at SovEcon said.
Considering the current record-low export pace for recent years, the export estimate will be lowered in the next forecast.
In the March report, the USDA lowered its export estimate by 500,000 metric tons to 45.0 million metric tons.
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