Exporters test buying appetite with Russian 12.5% wheat offers
Cash indications for Russian wheat heard in the Black Sea market for the first time since sanctions imposed
Cash indications for Russian wheat have been heard in the Black Sea market for the first time since the Russian invasion of Ukraine triggered sanctions, trade sources told Fastmarkets Agricensus on Tuesday.
Offers for Russian 12.5% wheat are among the first indications to have been heard since Vladimir Putin ordered the invasion of neighboring Ukraine, sparking the biggest military conflict in Europe in decades and bringing international condemnation.
Levels for 15,000 mt of 12.5% protein wheat were widely shared at $373 per tonne for a Novorossiysk basis cargo, with 25,000 tonnes heard offered at $370 per tonne.
“There are offers, they are very scarce, but they are there,” one trade source told Fastmarkets Agricensus.
“There is no demand because ships do not want to enter ports, but also amid other reasons,” the source said.
Fastmarkets Agricensus assessed the 12.5% Russian wheat market at $315 per tonne on February 23, the last day before Russia launched its invasion in the early hours of February 24.
Meanwhile, indications for European Black Sea wheat have been heard in the region of $380 per tonne.
The indications throw the first light on what impact the war has had on both the Russian market and wheat sellers, with indications apparently heavily discounted amid signs that sellers are looking to funnel payments outside of Russia.
“A personal thought – similar to Iran paying more, Russians will charge less… One Russian Novo seller says paying to a first-class Kazakh bank and it seems like no owner wants to go to Novo for now,” a second source said, referring to the Black Sea Russian port of Novorossiysk.
Market sources have also highlighted signs of some activity in the region, with a trade said to have been concluded on Friday – 24 hours after the invasion began and while the world awaited details of retaliatory sanctions – and moves by international players to shuffle some of their options.
The trade was said to have taken place at $340 per tonne FOB on Friday, although further details were hard to confirm, while other offer levels heard by traders have been dismissed.
“I heard someone at some hour indicated $350 per tonne for Russian 12.5% and some heard $399 per tonne for Romanian 12.5%, but they are worthless numbers in a void,” another trade source said at the end of last week.
That came amid massive fluctuations on international wheat prices, with futures for Chicago soft red winter wheat contracts hitting daily limits on the way up on Thursday and again as price plunged on Friday.
Alongside that, a third source highlighted that many of the sanctions don’t come into effect until later in March, while some volumes of loaded grain are likely to be on the water or displaced from existing contracts.
“It’s not easy, but sanctions are not in effect yet – only from the end of March,” the source said.
A wide-range of sanctions have been leveled at Russian entities, financial institutions, government officials and others connected to Vladimir Putin and his government, with the US, European Union and the UK among others imposing penalties in the immediate aftermath of the invasion.
One international trader was said to have switched a vessel from a Ukrainian port to a Russian Black Sea port in order to complete loading of grain, according to a source, although Fastmarkets Agricensus could not confirm the switch.
The onset of conflict caught the market off guard, despite weeks of mounting tensions ahead of the decision to invade as Russia ramped up its military presence in Belarus, to the north of Ukraine, and along the countries with a shared border along the east of Ukraine.
The attack forced Egypt’s state-backed grains buyer to apparently abandon a wheat buy tender it had announced late on February 23 and expected to close on February 24.
After the invasion started, wheat prices raced higher – hitting daily volatility limits on international exchanges – and meaning the agency received just one offer at $400 per tonne.