Russian wheat surges to highest price in 21 months amid tight supply

The Platts-assessed FOB Russian wheat price for 12.5% protein surged to its highest level since May 2023, reaching $254/mt Feb. 25 amid tight supply and slow exports.

The last time the price was this high was in May 2023, when Russian traders stayed below an unofficial price floor level of $275/mt to appeal to buyers' bids and to sell off their old crops before the new season started in July.

However, the current scenario starkly contrasts the previous two years, which were characterized by record crop production of 99 million mt and 90.5 million mt in the marketing years of July-June 2022/23 and 2023/24, respectively, Platts data showed. For the 2024/25 season, production fell to 8.9 million mt year-on-year due to frosts and drought conditions in early May 2024.

Russian traders attributed the price rise to limited stocks, as farmers opted to withhold their goods in anticipation of better prices. "There are almost no offers in the local market, which is pushing traders to pay at high levels," one seller said. This reluctance to sell, coupled with slow export activity, has led to a tightening market. One trader added, "I think Russia will stay high unless export taxes and the ruble changes," highlighting the sensitivity of Russian export prices to fluctuations in the weekly calculated export tax and the ruble's volatility against the dollar.

From Feb.15, the Russian government set an export quota for the remainder of the marketing year at 10.6 million mt. However, traders predict that actual export potential could drop to as low as 8.1 million mt. For February, Russian wheat exports are forecast to be just 2.2 million mt, a significant decrease from 4.4 million mt last year, local Russian analysts said.

Despite the rising prices, overall demand has remained relatively steady. Buyers have raised their bids for FOB Russian 12.5% to $253/mt for March on Feb. 24, while others are waiting, hoping for a price drop and exploring more affordable alternatives from Romania, Bulgaria or Australia, factoring in freight costs. The price spread between FOB Australian Premium White (APW) and Russian 12.5% protein has narrowed to just $5/mt, down from $9/mt the previous week, while FOB CVB 12.5% has been assessed at $6/mt below Russian wheat at $248/mt on Feb. 25.

In Egypt, buyers are opting for Russian and Ukrainian wheat, having purchased 1.2 million mt from Russia and 317,207 mt from Ukraine since the start of the year, according to vessel lineups from traders. The freight to Egypt from Ukraine stands at $13/mt, with recent trades heard at $255/mt for March. One buyer said that the preference for Russian wheat is largely due to its superior quality, although price sensitivity has increased among buyers as the spread between the different origins narrows.

Platts-assessed FOB Ukraine 11.5% also surged to $243/mt, the highest since May 2023. Ukraine has about 4.5 million mt of wheat remaining under an export quota of 16.2 million mt, while Romania and Bulgaria have around 3.5 million mt available.

Elsewhere, in Turkey, the import market continues to experience subdued demand due to the 75/25 import quota. Importers must fulfill 75% of their purchases through the Turkish Grain Board, or TMO, before accessing the remaining 25%. Concerns about the quality of TMO stocks have prompted some millers to seek high-protein wheat, with a $10/mt price spread to the 12.5% protein wheat. Platts assessed the CIF Marmara 12.5% coaster market at $249/mt on Feb. 25 for March.