Russian wheat exporter seeks to back out of sale below $240/mt price floor: traders

Russian wheat exporter Agric SA is seeking to default on the sale it agreed with Egypt's state grain board GASC in the most recent tender, according to multiple market participants that said it was evidence of price fixing by the world's biggest exporter.

There were 19 separate parcels offered into that tender, which closed late June 6, with a gap of more than $30/mt between the least competitive offer and Agric's which was the only one that the grain board accepted.

Neither Agric nor GASC responded to a request for comment. Russia's Ministry of Agriculture has not made any public comment on its pricing policy, but business daily Vedomosti reported that the ministry told trading companies at a June 1 meeting that they shouldn't sell wheat for exports at less than $240/mt.

"This is the real price of Russian wheat. The other suppliers submitted exaggerated prices," said one person close to the tender process.

Russian, Romanian and French wheat was offered to GASC that requires the sellers to be represented by Egypt-based agents.

The offers of Russian wheat submitted to GASC were all for $240/mt FOB except for Agric SA, a relatively unknown company on the market, which offered a 55,000 mt parcel for $229/mt FOB Kavkaz.

"The agent made a big mistake," said one Egypt-based market participant, who said that the offer was $11/mt too low. "There was a lack of communication about the unofficial Russian export prices."

"They [Agric SA] will try to recall the offer," said one Russia-based market analyst. "I doubt that RIF would have done it," the analyst added, referring to the country's largest grain exporter that trades through Grain Flower, one of the companies that offered 345,000 mt wheat in the tender, all price at $240/mt FOB.

"They [Agric] lost their bid bond ... they received a call from the agriculture ministry not to sell," said a Geneva-based trader, referring to the cost of around $500,000 that Agric would incur from defaulting on the sale to GASC.

"We're not interested in wasting our potential and trading at [levels that cause] a loss to Russian agricultural producers," said Eduard Zernin, chairman of the Russian Union of Grain Union Exporters.

"We do not consider foreign exchanges as reliable price indicators," said Zernin in comments published on the day of GASC's tender.

The Russian Union of Grain Union Exporters represents the largest traders in the country.

Platts assessed June 7 a 25,000 mt cargo of 12.5% protein Russian wheat at $223/mt for July 5-19 shipment, according to data from S&P Global Commodity Insights.