Last week, bids for Russian 12.5% protein wheat at deep-sea ports fell to 16,500–16,800 rubles per metric ton, down from 16,800–17,000 rub/mt the previous week, according to SovEcon’s price monitoring.
This drop in prices was the first decline since late August, and SovEcon attributed it to a stronger ruble and weak wheat demand in Russia’s non-southern regions.
The Russian ruble saw a significant appreciation against the US dollar during the same period.
Firm ruble weighs on prices
As of October 3, the exchange rate reached 81 rubles per dollar, marking a notable 3.1% week-on-week strengthening.
A stronger national currency typically makes exports more expensive for international buyers, which can reduce demand and subsequently push down local currency prices for commodities like wheat.
This effect, coupled with the weakened domestic demand outside the southern agricultural heartlands, contributed to the overall price drop observed in the deep-sea port bids.
The global wheat market is currently experiencing significant fluctuations, with Russian wheat export prices holding steady at an average of $230–232 per metric ton (FOB – Free On Board).
This, however, has not translated into sustained profitability for exporters. In fact, a recent analysis indicated that exporters’ margins have turned negative, creating a challenging environment for those involved in the Russian wheat trade.
Exporters reduce purchase prices
To counteract these negative margins and ensure their continued viability, exporters are now compelled to reduce their purchase prices for wheat from domestic suppliers, SovEcon said.
This strategic adjustment aims to re-establish a healthy profit margin, albeit at the potential expense of local farmers and producers who may face lower prices for their harvest.
The situation highlights a delicate balance within the agricultural supply chain, where global market dynamics directly impact local economies.
The long-term implications of these lower purchase prices for Russian farmers remain to be seen, as it could influence future planting decisions and overall wheat production levels.
Domestic prices for 12.5% protein wheat decreased by 275 rubles to 14,000 rub/mt, following a decline in purchase prices, according to the agricultural consultancy.
SovEcon added:
Prices were pressured by weaker demand from exporters outside the South and falling purchase prices in southern regions of Russia.
Prices likely to decline further
Many farmers are keen to sell wheat at reduced prices to quickly generate cash. However, some producers are delaying wheat sales to prioritise the harvest and sale of sunflower and corn crops, the consultancy added.
“Exporters are likely to continue pushing prices down in an effort to improve their margins, which remain low by recent years’ standards,” SovEcon’s Managing Director Andrey Sizov said.
They may be supported by a gradually increasing grain supply. Domestic prices could find support from the current pickup in exports, despite still relatively high prices for this season.
SovEcon has increased its September export forecast to 4.6 million metric tons (mmt), a rise of 0.3 mmt. This figure remains below the five-year average of 4.9 mmt.
Wheat exports in October are forecast at 4.7–5.2 mmt, versus a five-year average of 4.5 mmt.
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