Russian Wheat Prices keep Continue to Rise !!!

https://www.agroinvestor.ru / Elena Maksimova Agroinvestor December 12, 2019

High Demand for Russian Wheat in Foreign Grain markets remains, so for now do not worry about lower prices !!!

CONSUMERS ARE ACTIVELY BUYING GRAIN, REALIZING THAT IT WILL NOT GET CHEAPER !!!

Last week, export prices for wheat rose by $ 2 to a new seasonal record of $ 212.5 per tonne (FOB deep-sea ports), it follows from the monitoring of the SovEcon analytical center. Prices are rising in the domestic market. Demand from processors and exporters remains high, as many want to stock up on grain before a long period of low market activity in late December – early January, the center said in a report. According to him, many farmers have already sold the grain that they planned to sell in 2019, and left the market.

According to the head of the grain direction of the Institute for Agricultural Market Studies (IKAR) Oleg Sukhanov, a gradual increase in wheat prices is observed in the market, but so far they have not reached the maximum level of recent seasons. “Such dynamics is quite expected given that in the South there are now minimal wheat stocks, and in most other regions the grain remains are low,” he commented to Agroinvestor. 

According to ICAR monitoring, now selling prices for wheat with protein 12.5% ​​(FOB Novorossiysk) are on average $ 209-210 per tonne with supplies in the second half of December – early January. February and March contracts are priced higher – around $ 215-216 per ton. “Despite the fact that exporters complain about the low margin of business this season due to high selling prices, shipments of Russian wheat abroad are quite high and officially amount to about 19 million tons with an export potential of 33-34 million tons,” says Sukhanov. “It is important to note that demand for Russian wheat in foreign markets persists, so for now, do not worry about lower prices.”

Strengthening wheat prices is a good incentive to increase its production, said Alexander Korbut, vice president of the Russian Grain Union. Their further dynamics will be moderate, but upward, he thinks. “Consumers are now actively purchasing grain, apparently realizing that it will not get cheaper,” the expert explains. He recalls that this year, of the 18.2 million hectares of winter crops sown, 15.5 million hectares fell to wheat – this is a rather high indicator. “Given the favorable forecasts – at the end of December, most regions promise snow that will cover wheat until the first frosts – a good harvest can be expected next year,” Korbut predicts.

Sukhanov also believes that with a high degree of probability the upward trend in wheat prices will continue until it becomes clear how winter crops were wintered. This will happen in late February – early March at best. “And we are talking not only about Russia, but also about competing countries. If wheat normally tolerates winter, and the species for a new crop is good, then some slight short-term rollback of prices in some regions is possible. Of course, provided that the processors are sufficiently provided with grain, ”he adds.

As for barley, there is no demand for it either on the external or domestic markets, continues Sukhanov. This year, quite a lot of substandard grain, which is difficult to attribute to feed or brewing, the so-called “non-class” product. “It is not yet clear how this barley will be sold. Most likely, farmers will try to gradually sell these stocks, which will restrain prices. In general, this agricultural sector has few prospects for price increases, ”the expert believes. 

According to the Rusagrotrans analytical center, barley exports are significantly lower than last year due to competition with Ukrainian barley, the export rate of which is very high – almost 3.6 million tons against 3.1 million tons a year ago, and European – 3.6 million tons. which is 1.5 times higher than a year earlier. “But the export potential due to production growth in Russia is high, and export rates are likely to exceed last year by spring. Although the increase in shipments will be disproportionate to the increase in the crop, ”said Igor Pavensky, director of the department of strategic marketing and corporate communications at Rusagrotrans.

According to the expert, corn export is also under pressure from neighboring Ukraine, where shipments are forecast to be slightly lower than last year – at the level of 30 million tons. Therefore, despite a decent harvest, Russian exports will not grow very much compared to last year. Export of corn is still rather sluggish, it is not comparable with the size of the crop, confirms Sukhanov. “This is due to the low price in the foreign market, where we are in the shadow of Ukraine with its record gross fees and export,” he explains.

In addition, the share of feed wheat in the 2019 crop has decreased significantly. According to the Grain Quality Assessment Center, it decreased from 27.4% in 2018 to 20.7%. “The estimated gross yield of 5th grade wheat, based on our estimate of soft wheat harvest this year at 75 million tons, is 15.5 million tons against 19.6 million tons a year ago. This means that the consumption of both barley and corn within the country will increase slightly, and part will go to carry-over stocks, ”says Pavensky.

Sukhanov notes that almost all demand for corn will be provided by livestock producers and producers of starch and syrup products. Including this is due to the high quality of the wheat of the new crop, he agrees with Pavensky. “Feed wheat is difficult to find, and it’s expensive to feed animals with food grains, so livestock breeders are replacing wheat with corn where possible,” he knows. “I believe that this trend will continue until the new crop and keep domestic prices at an acceptable level, that is, corn prices will move in the wake of wheat prices.”  

Prices for rye, whose harvest in Russia this year may be the lowest since the dry year of 2010, soared last week, it follows from the monitoring of the analytical company ProZerno. The greatest growth was noted in the Urals, where rye rose immediately by 1.5 thousand rubles. up to 12.25 thousand rubles / t. In a number of regions, rye already costs more than 3rd grade wheat.

Rye production, while maintaining demand for it, fell, so prices rose. “I believe that for some time they will continue to increase, although there is a natural limiter – the possibility of bakers to buy rye flour, so I think growth will gradually fade,” Alexander Korbut believes. According to the RZS, winter rye is sown quite a lot – 1.1 million hectares, which should calm the market. With such high prices, there will be no export demand for rye, only domestic from flour mills, Korbut thinks. 

ICAR estimates this year’s rye crop at 1.6 million tons compared to 1.9 million tons in 2018, mainly due to a decrease in crops. Therefore, agricultural prices are now high on the domestic market, confirms Sukhanov. They began to grow in September and now in the areas of the Central Black Earth Region and the Volga region, rye is trading at 12.5-13 thousand rubles per ton, which is higher than the demand prices for wheat of the 3rd class. For rye, this is quite rare. “However, rye is a thing in itself. This is not an export agricultural crop, although, of course, we export rye, but in incomparably smaller volumes than wheat or corn, ”says Sukhanov. – Therefore, the basis of demand for it is internal processing. As practice shows, rye prices can fall sharply if at some point demand for it suddenly disappears. ” Therefore guarantee 

 

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