Even with Russia's available wheat supply growing as this year's harvest reaches its final stage, prices could still rise by almost a third in the coming months as a backlog of export orders is combined with domestic demand, market sources told Agricensus on Tuesday.
The 2019/20 marketing year harvest reached 72.1 million tonnes this week, according to data from the Ministry of Agriculture, with the crop harvested from 88% of the sown area.
That leaves this year's harvest on track to improve the USDA's current forecast of 72.5 million tons.
But despite the increase in supply, prices have shown little sign of falling in recent times as farmers maintain their stocks and wait for better offers from exporters, a trend that analysts expect to remain the norm in the coming months.
“In the central and southern parts of Russia – the main export regions – we have already overpriced,” Andrey Sizov, managing director at analytical agency Sovecon, said of domestic Russian wheat prices.
Sovecon expects a “price increase of 20 to 30%” over the next four to six months, according to Sizov.
Firmer domestic prices coupled with a stronger ruble have left traders in an awkward situation as FOB prices – those that exporters show to the international market – have fallen below the origination cost.
At the moment, the highest official official bids in Novorossiysk for 12.5% wheat were seen at US $ 177.50-179/mt CPT on Tuesday, while the best-priced export levels were at US $ 188/mt FOB for loading in October.
With loading costs at Russia's Black Sea deepwater ports between US $ 15 and 22/mt in the current market, margins on paper are non-existent.
And there is little respite for exporters, with domestic demand from producers and feed mills in Russia also rising and competing with exporters' needs.
“Mill prices are already better than export prices in some areas,” said a trader.
