The government may introduce a minimum price for wheat exports - Prices continue to decline

According to Bloomberg, Russian authorities are considering setting a minimum price for wheat and are refusing to issue export documents for supplies at a lower cost. Wheat exports from Russia have reached record levels, but export prices have fallen to their lowest levels over the past three years.

Agency analysts note that Russian wheat does not have many competitors on the market, and the excess supply is caused by large reserves and a record harvest, which leads to lower prices. According to Bloomberg, the Russian authorities' intention to set a minimum price for supplies is forcing some traders to reconsider terms or cancel transactions. The Union of Grain Exporters told Bloomberg that market participants adhere to prices determined by increased production costs.

Pavel Konev, director of IT and innovation at the exporting company Delivery by Sea, told Agroinvestor that the export price of wheat supplies FOB Novorossiysk with a protein of 12.5% actually decreased throughout last season, but since July it has been trending slightly upward. “In any case, now after harvesting there is a traditionally high supply of goods, which creates pressure on the price and pulls it down,” Konev noted. “In general, we expect the trend towards a gradual increase in export prices to continue, taking into account the expected supply/demand balance and inflationary processes in agriculture in all markets.”

According to him, the company has not encountered cancellations or revisions of the terms of transactions and works with clients on market conditions. Konev emphasized that usually the introduction of minimum selling prices leads to a slight reduction in the volume of concluded export contracts that match the price. “How this will work in practice, if implemented, depends on the level of these minimum prices in comparison with the market level and with the reaction of other exporting countries to our actions,” he said.

General Director of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko says that there is no clarity yet regarding the formalization of setting a minimum price for wheat. Unofficially, this measure has been in effect for a long time, the expert emphasized. “What its formalization could lead to is still unclear, because there are no such prices on the world market yet. There is quite a serious discrepancy between the desires of exporters and what the world market now offers,” he told Agroinvestor. According to Rylko, export prices for wheat at the end of last week dropped to $235 per ton.

In early June, the Ministry of Agriculture recommended that Russian grain exporters not sell wheat on the foreign market for less than $240/t, Agroinvestor wrote. The initiative was associated with the low cost of grain on the domestic market, where prices for 4th grade wheat as of May 31 amounted to 9,925 rubles/t - 33.6% less than a year earlier.

According to the SovEkon analytical center, cited by Kommersant, on the Russian market, 3rd class wheat with pick-up for the week of September 11-15 fell in price by an average of 250 rubles. up to 13.5 thousand rubles. per ton, on the 4th - by 425 rubles. up to 12.4 thousand rubles. per ton. A week earlier, quotes dropped by 125-400 rubles. per ton. Wheat is becoming cheaper due to weak demand from exporters and local consumers, analysts say.

In August, Russian grain exports reached a record 6.75 million tons in history, including supplies to the EAEU, including 5.36 million tons of wheat, the Rusagrotrans analytical center reported. Wheat exports in September could reach a new record - 5.45-5.5 million tons, taking into account the EAEU countries, center analysts predicted. President of the Russian Grain Union Arkady Zlochevsky estimated that this agricultural year Russia could break the grain export record set last season. The prospects for the harvest are very good, and carryover grain reserves are at a historically high level, explained the head of the union.