Black Sea wheat price falls despite government-backed tender buying
Buyers target Russian 12.5% wheat while demand from the private sector has been very limited
Black Sea wheat prices have shed around 2% in just a few days, despite the flurry of government-backed tender buying as private buyers continue to stay away, trade sources have told Fastmarkets Agricensus.
The biggest falls have been reported for Romanian and Bulgarian 11.5% wheat, which has lost $7 per tonne since Thursday, January 13, and was heard offered at $314-$315 per tonne FOB CVB on Monday, January 17.
Ukrainian 11.5% offers also dropped by around the same value as the lowest offers heard on Monday were at $320 per tonne FOB Mykolaiv or around $325-$330 per tonne range for bigger vessels.
The exception was Russian 12.5% wheat, hinting at some of the dynamics at play, with values for the staple Black Sea grade moving only a touch lower - from $335-$340 per tonne FOB NTT to $333-$335 per tonne FOB NTT for January-February loading.
It comes as demand from the private sector has been very limited, while over the last week over 1 million tonnes of wheat has been booked by state actors at a series of tenders.
Alongside the tenders already open, Turkey’s TMO is expected to settle its latest buy tender as it looks for 335,000 tonnes of milling wheat.
The key lies in the qualities being purchased, with most of the tendering countries looking for 12.5% protein milling wheat, with the exception of South Korea that typically buys feed wheat.
Algeria nominally requires 11.5% protein officially, but a deeper review of the specifications suggests it is more likely to be met from 12.5% supply than the lower protein 11.5% Ukrainian wheat - that technically meets the protein requirements.
That means demand for 11.5% is very thin, even among the welter of tenders.
Meanwhile, Russia has another factor that is slowing price falls – with only a thin space between the current export tax level and the domestic origination prices leaving very little room for any price drop.
Currently, the tax stands at $97.50 per tonne, while according to officially shown purchasing bids, domestic levels are heard at around $212-$217 per tonne in Novorossiysk.
That would equate to an FOB level of around $336 per tonne, much higher than the current offers for spot loading.
“There’s no demand currently, especially for spot loading. Argentina is pretty cheap, plus tenders are mainly for 12.5% protein wheat while for 11.5% there’s no demand,” one trader explained.
The trader went on to say that there is some buying interest from Egypt, but price levels are still very low amid expectations that lower protein wheats do not face the same limits on supply.