London — The relatively high cost of Russian wheat loading at deep sea ports -- stoked by a strong domestic market -- has led to a build-up of stocks at the very prompt as buyers have been seeking alternatives, market sources said Friday.
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"Russia is shedding a bit more demand [due to its high price]...Inquiries are floating around for French, Baltic and Argentine wheat now," a source said.
That followed on from a negotiated deal heard last Friday to send 400,000 mt of US wheat to private buyers in Egypt and Nigeria, according to sources, as well as active participation from the US in Egypt's public wheat tenders.
Consequently, weakness has been developing on the spot market, a source said, while another said some sellers will hold out at these levels as "domestic prices are so hot".
A shortage of wheat in Russia, especially near the main ports, has sent the domestic price soaring.
That has resulted in Handysize FOB 12.5% protein wheat surging $10/mt over the past month to $246.50/mt, as assessed by S&P Global Platts Thursday.
Wheat originators now have to hunt for grain from remote inland regions such as Siberia or Volga.
"The interior price rally is quite amazing," one source said. "It would take $255/mt or more to acquire anything in the interior."
Spot offers for Russian wheat were liftable at $243/mt, $4/mt lower than offers for late February-loading, and almost matching alternatives.
European wheat can be lifted at $240-$242/mt, while US is offered at $239/mt.
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The difference becomes more stark for March-loading prices.
Offers were heard Thursday at $252/mt for Russia, while European was offered at $244/mt, and Argentine and US both at $242/mt.
Sources said it was unlikely that Russian prices will drop significantly, given the strength of the domestic market.
If buyers move away from Russia like they did in the fourth quarter due to good coverage and cheaper Argentine alternatives, Russian sellers could offer more competitively. Russian wheat prices fell $6/mt in October for positions loading in November and December.
Nevertheless, the forecast inelastic wheat demand of Turkey at 1.5 million mt and Egypt at 4.5 million mt expected before the end of the marketing year will likely see any supply build-up clear and prices remain supported with potential upside, sources said.
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