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Demand seen returning to Russian wheat at $225/mt

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Demand seen returning to Russian wheat at $225/mt

London — Deep sea port Russian 12.5% protein wheat market participants expect buyers to return to the market at $225/mt as market prices fall in an attempt to tempt buyers back.

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Destination demand has slowed considerably in the last few weeks as buyers balked at surging costs, preferring to dip into their stockpiles.

Subsequently, more offers have made their way into the market place as sellers struggle to find parcels new homes.

This followed improving analyst expectations on the state of the current crop. The USDA WASDE report Friday revised its Russian wheat forecast production 1 million mt higher to 68 million mt.

The softer fundamentals were also reflected by S&P Global Platts 12.5% protein wheat assessment Wednesday.

Prompt-loading was assessed at $228.25/mt, down $6 on the week but still clinging onto its 41-month high.

However, with Egypt's GASC returning to the market Tuesday in response to a dip in prices, where it booked 420,000 mt of wheat for delivery in two windows, September 21-30 and October 1-10, the softer prices have already caused fundamentals to tighten.

"I'm of the view that buyers will come out with fresh demand to take advantage of the correction and stop [the price drop]," a source said, adding that there is a lot of demand on the sidelines.

Another source said: "I think the market will drop $5 [from Monday prices at $229.50/mt] before picking up again."

Uncovered demand still remains for loading windows in September to October. Wheat sales to particular buyers such as Egypt and Turkey have lagged this marketing year (starting July 2018) compared with a year earlier.

The may change, however, with the Turkish government approving funding Wednesday for state grain agency TMO to purchase 750,000 mt of wheat, among other grains.

--James Colquhoun, james.colquhoun@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com