European wheat length pulls Russian new crop wheat market lower


Heavy wheat stocks in Europe are pulling old crop and new crop Russian wheat prices lower as sellers contend with limited selling opportunities.

 Europe is expected to move 20 million mt of wheat by the end of the marketing year finishing June 30, 2019, having sold close to 10.5 million mt to date, according to the latest EU Crops Market Observatory data.

However, slow sales to Saudi Arabia, Egypt, Jordan and South Africa, several big buyers of EU wheat have pressured EU sellers into slashing their prices.

The EU has exported 20% less wheat on the year to each of these countries, rising to over 50% less for South Africa.

This added length has seen EU sellers slash their offer prices, now liftable at $232-$234/mt for FOB 12.5% protein wheat loading in February or March.

A month ago February-loading was offered at $240/mt, while spot was offered at $238/mt.

The knock-on effect is expectations of higher ending stocks, which when coupled with forecasts of good weather for the new crop, arriving in July to August, which only intensifies bearish undertones for prices from July and August onward.

Russian new crop FOB 12.5% protein wheat is now bid at $198/mt and offered at $200/mt. At the beginning of February this was $205/mt versus $210/mt.

Ukrainian new crop 11.5% protein wheat traded at $200/mt. The usual discount of 11.5% to 12.5% protein wheat is around $10 when the fundamentals for both wheat protein grades are balanced.

Undoubtedly, the EU wheat length is pulling Russian old crop prices lower too as it diverts any buying interest away from Russia and to Europe.

S&P Global Platts assessed Russian 12.5% protein wheat at $238/mt Friday, $8.25 lower on the week.


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