Platts MWM sees initial price drops, but wheat quality, supply concerns persist

The Platts Milling Wheat Marker has fallen to $238/mt on Aug. 5, down 1.24% from July 24, marking the first decline since the new marketing year began in July. This drop was primarily due to weaker demand; however, concerns about quality and supply in Russia and Ukraine could limit significant declines in the short term, traders said.

Launched in June, the MWM is calculated based on the most competitive daily end-of-day value from the largest wheat export region, the Black Sea. It includes Russian 12.5% protein, Ukrainian 11.5% and CVB 12.5% FOB wheat. Since the official start of the wheat harvest in July, the MWM has been priced at parity to the Russian 12.5% protein.

Russian sellers cite low stocks, harvest delays and low yields in Southern Russia as key factors preventing further declines.

"Logistics is a concern," one seller said. "It is impossible to load a boat."

In Stavropol, yields reached a record high of about 4.5 mt/hectare, up 21% year over year. Conversely, Rostov reported a yield of around 2.6 mt/ha, the lowest since 2013, down 26%, while Krasnodar of about 4.6 mt/ha, the lowest since 2012, a 29% decline due to June droughts, Russian agricultural center SovEcon said.

"There are great problems with delivering good quality wheat to the ports," a second seller said.

Producers, meanwhile, are hesitant to sell, hoping for higher CPT bids from exporters, a third seller said.

"It all depends on the farmers," he said.

CPT 12.5% is currently priced at $212/mt (Rb 17,000/mt).

"I'm waiting for lower prices inside Russia," an exporter agreed.

Buyers waiting for lower prices

Despite these concerns, buyers remain optimistic about further price drops, anticipating prices could reach $230/mt as more wheat is harvested, particularly from Russia's central and Volga regions.

"We all think September $230/mt or below will be available soon," a buyer of Russian wheat said.

As of July 31, Russia had harvested 30 million mt of wheat, while Ukraine had harvested 11.4 million mt with an average yield of 3.7 mt/ha, down from 4.4 mt/ha the previous year.

In July, the MWM averaged $233.21/mt, with Russian 12.5% protein wheat priced at parity and maintaining that parity so far in August. Despite Ukrainian 11.5% wheat holding a discount of $6.4/mt in July, at the start of August, this has reached a tight spread of negative $3/mt, driven by low yields and high CPT prices.

"Producers are not that willing to sell, and the program is there, so you've got to pay up," a Ukrainian exporter said.

One issue has been the "deteriorated" quality of wheat in Western and parts of Central Ukraine, a producer said. "We didn't manage to harvest it all in time," he said.

Other buyers say they are staying out of the Russian market.

A buyer in the UAE said he was waiting for more quality analysis from the harvest before purchasing. "We remain cautious till then," he said.

Adding to the weaker demand, Turkey, the largest flour exporter in the world, faces challenges with flour exports due to reduced imports from Iraq, which is supporting domestic wheat and flour production through subsidies and stricter import regulations, according to an Iraqi source. Additionally, Turkey is dealing with high local production costs and elevated import taxes from countries like South Sudan, flour exporters said. Platts, part of S&P Global Energy, assessed 12.5% wheat CIF coaster market into Turkey on Aug. 5, down 2.5% to $233/mt.

In Romania, farmers harvested 12 million-13 million mt, with more than 90% expected to meet the 12.5% grade quality.

"The extra couple of million tons are mixed qualities," a local exporter said. Romanian-Bulgarian wheat (CVB 12.5%) averaged a premium of $3.80/mt to the MWM in July, while low-protein 11.5% at a negative $1.70/mt.

Elsewhere, French milling wheat (Rouen) maintained a $1.80/mt discount to the MWM in July, driven by harvest season dynamics and stable demand from North African buyers. Outside Europe, Australian Premium White wheat averaged $26.20/mt above the MWM and Canada Western Red Spring wheat (13.5% protein) held firm at a premium $34.77/mt.