Russian deep sea wheat soars to $228.25/mt, a 41-month high, despite weak demand


Russian FOB deep sea port 12.5% protein wheat surged to a 41-month high at $228.25/mt as assessed by S&P Global Platts Tuesday despite demand faltering from regular Russian wheat importers.

Russian wheat has now risen by $11.75 on the week as farmers continue to sit on higher quality protein wheat on an expected shortage due to months of drought and hot weather.

However, demand from big buyers has been absent, due to the higher prices, leaving some in the market to question how long the firm rally can continue.

"Consumption demand is lagging. However, milling wheat buyers will be forced to come into the market and pay the higher prices," a source said.

At present, domestic wheat trading in Egypt is well below replacement, while Indonesia is not in the market at all.

CNF to Egypt for 11.5% Russian protein wheat was heard offered Tuesday for August delivery at $222/mt. Locally, the wheat trades at around $208/mt, sources said.

The higher prices are also driving some importers to switch to cheaper substitutes.

"Some destinations are buying corn and other feedstuffs instead of wheat due to the high prices," a source said.

South Korea, for instance, recently closed a buy feed wheat tender without making any purchases due to the mounting prices, opting instead to buy Pacific North-West US corn, which remains highly competitive, according to a source.

Even so, the surge in wheat prices has raised bullish forecasts for other crops such as Ukrainian corn, which has rallied to a six-week high for prompt-loading, up $6.75 week on week to $185.75/mt.

This has been reflected in new crop trading too where European feed millers have been forward buying to cover themselves.

Ukrainian Panamax port FOB first-half December-loading Handysize cargo was heard traded Thursday at $192-$193/mt (111 cents/bushel over the December Chicago futures contract), up from a previous trade of $185.13/mt a week earlier.

With prices rising rapidly in short time periods, the "market feels a bit exhausted now [and]... may be [heading for] a correction. A lot of people are sitting on a lot of profits," a source said.

Nonetheless, while European, US and Australian wheat continues to price at a large premium to Black Sea origins, it is unlikely that farmers will lower their prices without a radical move in any of these destinations.


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