Black Sea grains tempt Asia’s buyers with low prices

Following the agreement for a safe grain corridor, wheat and corn cargoes are loading in Black Sea ports, but buyers' concerns remain

Black Sea wheat offers have been dropping fast in the last week amid the opening of the grain corridor from Ukraine that has increased flows. While news of record wheat production forecast in Russia has meant that offers from these origins have become the cheapest options for Asian destinations.

Yet, despite the low prices, buyers are still being cautious about stepping in and making purchases.

Ukrainian 11.5% wheat offers fell by $30 per tonne last week to $355 per tonne basis offers delivered CFR into Vietnam or Indonesia for the September loading.

Russian wheat selling ideas were also in free fall during the same period. Although, the latest offers on the same basis were heard at a slightly higher level, closer to $370 per tonne.

Overall buying ideas remain well below, with levels heard at $346 per tonne CFR.

“For Russian origin [wheat], buyers can possibly pay a little more, since it will definitely be delivered. But only a little more. Ukrainian [prices] can go down further since while the corridor is working, it is necessary to sell and export and turn this into money,” one broker said, contrasting the situation with Russia, where he felt levels had limited downside.

The pressure also comes as freight rates are at very high levels from the Black Sea, with ideas for Ukrainian cargoes delivered into Asia heard at around $75 per tonne. In comparison, the freight for Russian loads is thought to range from around $55 to $75 per tonne, depending on the cargo and the fleet.

Indian or Chinese shipowners are likely to be at the lower end of the scale. Still, prices are much higher if the vessels are Greek-owned, a particularly pressing factor since the largest fleet is mostly European-owned, freight sources told Fastmarkets Agriculture.

Meanwhile, most trade sources speaking to Fastmarkets have said that, for now, they are still cautious about both Ukrainian and Russian origins because of the implied risks. The main concern is that if the recently agreed corridor closed at any time because of further attacks or new sanctions on Russian exports, cargoes would simply not be delivered.

The challenges facing wheat importers

Importers are said to be facing financial difficulties while they are looking to resume Ukrainian imports, with some banks refusing to issue letters of credit (LC) amid the war risks.

“The problem the buyers are concerned about is that no bank and no insurance company will agree to do for their contract if it’s done,” a Vietnam-based trader told Fastmarkets.

“Let the brave ones move first. I wish to play third fiddle,” a buyer based in Indonesia said.

Also, some buyers have confirmed a preference for Australian wheat, as the price gap when compared is relatively small. But the issue with Australian wheat is that old crop for September through December dates is already booked, and there is a lack of capacity.

At the same time, Vietnam has allowed at least two Russian wheat cargoes to be imported as a test exercise after a meeting was held in the country between the Russian and Vietnamese phytosanitary agencies.

Corn shipments

The same situation was reported in the corn market too. In this case, buyers have been searching for more competitive price options – with competition still coming from shipments out of South America and Myanmar currently quoted in a range of $330-335 per tonne CFR southern ports for September-December loading windows.

A rumor circulated the market earlier this week about a cargo of Ukrainian corn traded to Vietnam at $300 per tonne CFR southern ports, with the trade said to be between a multinational trader Viterra and Vietnam’s biggest importer Tan Long. However, full details are hard to confirm.

The cargo was also said to be an already-afloat vessel, which could explain the cited price level.

Another rumor the same week was that some Ukrainian corn had been sold to South Korea for September-October dates, but again, it is difficult to find any evidence to confirm this.

Unfortunately, at least for the time being, it remains almost impossible to get detailed and reliable information regarding new trades into Asia, while on the freight side of the market, trade sources reported that a few panamaxes had been prepped from Asia, and at least two were already on their way to Ukrainian ports where they would be loaded.

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