Russian export prices were slightly higher this week, supported by the domestic market. 12.5% wheat prices in deep-sea ports rose US$1 to US$254/mt, in shallow ports were up US$2 to US$235/mt.
The world wheat market was mostly flat. December Chicago SRW lost 1.6%, Paris was up 0.6%. Chicago was down on profit-taking, French wheat was supported by slightly weaker Euro and strong exports. Both contracts were up substantially in the first half of the week driven by a strong rise in the corn market.
WASDE report was bullish for the corn price where prices rose 4% after its release. In line with our expectations, USDA substantially lowered Ukrainian corn export and crop numbers (-8 MMT) and upped Chinese imports (+6 MMT). As a result, we see a substantial increase in exports and the decline of corn stocks, mostly in the US. Most likely we would see further upgrades of Chinese imports as current 13 MMT still look too modest compared to trade estimates of around 17 MMT and 22 MMT projected by the Beijing FAS office.
The revision of wheat S&D was limited. Russian crop and exports were upped by 0.5 MMT to 83.5 MMT and 39.5 MMT. Australian crop was left unchanged at 28.5 MMT despite talks of better yields in Western Australia and potentially crop around 30 MMT or slightly higher. Argentina’s crop was cut by 1 MMT to 18 MMT, more or less in line with expectations. The global wheat balance remains relatively loose while the corn balance sheet is becoming tighter.
Russia’s AgMin published draft legislation on grain exports. The Ministry proposes to set a 15 MMT grain quota (wheat, corn, barley, and rye combined) for February 15 – June 30. The quota will be distributed among exporters based on their shares in grain exports in July-December. The quota volume is slightly below our estimates (16.4 MMT of grains, 12.5 MMT of wheat for the period) but overall is neutral for the market, in line with our expectations.
Russia’s traders’ attempts to push ports’ prices lower remain mostly unsuccessful. 12.5% wheat bids in deep-sea ports increased to 18,100-18,800 rub/mt from 18,000-18,700 rub/mt a week earlier (CPT). Some buyers warmed the market with relatively high bids during a few days. Average domestic prices for 4th grade wheat (typically 12-12.5% protein content) remained at 16,025 rub/mt. (USDRUB = 77.3 as of November 13).
We expect Russian wheat to remain relatively flat or move slightly lower short term.
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