Hesitation in wheat prices, pending Russian decisions

Wheat prices were hesitant on Wednesday on world markets, with operators carefully observing the pricing policy of Russia, which has so far dominated trade by selling off its huge stocks at low prices.

For a week, the price of wheat and corn changed little, from the Chicago Stock Exchange to the European market. Bread cereal oscillates between 235 and 240 euros per tonne on Euronext and yellow grain between 208 and 211 euros per tonne. “We feel a big market hesitation », summarizes Damien Vercambre, of the Inter-Courtage firm.

At the forefront of the potential factors for price increases is the downward revision of world wheat production by the United States Department of Agriculture (USDA), mainly due to lower-than-expected harvests in drought-stricken Australia, Canada and Argentina.

The harvest forecast on the island continent, which begins in December, was further revised downwards in September, with the Abares (Australian Department of Agriculture) estimating wheat production at 25.4 million tonnes for 2023-24, below the average of the last ten years.

However, “the potential for global price increases remains limited” in a market dominated since the spring by abundant Russian wheat exports : Europe has “exported very little since July” and is seeking to regain competitiveness, which does not argue for an increase in prices, notes Arthur Portier, analyst at Agritel (Argus Media Group).

In addition, the fact that Ukraine is testing the sending of cargo ships loaded with grain from the port of Odessa tempers a potential rise in prices. “It was a question mark, and so far it seems to be working,” said Jack Henley of the investment firm Teucrium Trading, referring to Russia’s threat to sink any Ukrainian ship taking the former secure maritime corridor for cereals.

“Russian floor price”

However, these “test” cargoes are not “a downward factor” for prices either because “the volumes are currently insignificant”, underlines Mr. Portier.

For analysts, the number one question today is about real prices of Russian wheat.

“There are big questions surrounding the still unofficial “floor price” imposed by Russia for its wheat, at $270 per tonne FOB (excluding transport costs, taxes and insurance), which has been circumvented by private operators. Russians,” indicates the Agritel analyst.

This floor price would have been circumvented in particular by a major Russian wheat trader to win a contract for 480,000 tonnes to Egypt: “It seems that the Russian government has slammed its fist on the table and imposed the reallocation of volumes sold to Egypt at prices lower than those of the unofficial floor,” explained Damien Vercambre.

Clearly, the trader will have to obtain the 480,000 tonnes promised by contract to Egypt from elsewhere than in Russia. This “event” has revived the hopes of European exporting countries, notably France, which has an FOB price of around 250 dollars per tonne (with transport costs higher than those of Russia).

“The demand is there but the Europeans weren’t taking advantage of it because the Russians were grabbing everything. Today, we see it,” added the broker, referring to new calls for tenders from Egypt, Algeria and Tunisia.

In the United States, the market remains gloomy, before the publication on Friday of a new inventory report by the USDA. “Energy prices are high and production costs are approaching sales prices” of agricultural raw materials, which could support prices, believes Jack Henley.

After weeks of decline, the prices of oilseeds (rapeseed, soya or palm oil), transformed into agrofuel, had rebounded slightly since Tuesday, in the wake of oil.

For Arlan Suderman, of the brokerage platform StoneX, the drop in prices was partly linked to the slowdown in demand from refiners, “not because biofuel has problems, but because they already had what they needed. needed while waiting for the harvest.

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