Russian wheat CIF Turkey prices sink to 13-week low on weak fundamentals


CIF-Marmara Russian 13.5% protein wheat slid to its lowest level in three months Wednesday at $242.50/mt amid strong coverage among buyers for high protein wheat and lengthy stocks in the EMEA region.

Prices have dropped $15.75 on the month, down $10 since February 11 as spot builds up, prompting sellers to slash their prices.

Buyers in Turkey are well covered for high protein wheat primarily due to the Turkish state grain buying authority's (TMO) recent tender for 13.5% protein wheat.

On January 31, TMO booked 292,500 mt of 13.5% protein wheat, which it planned to sell to domestic buyers at a subsidized rate.

Instead, buyers have focused their purchasing on lower protein wheat from 12.5% to 10.5% to blend with higher grades to minimize costs, sources said.

Many buyers in Turkey, particularly end-users who use high protein wheat to produce flour for export, have seen their margins squeezed over the last year as they contend with a weak Turkish lira against the dollar, which consequently pushes up replacement costs and reduces credit lines.

As a result, a spate of CIF 11.5% and 12.5% protein wheat trades have been concluded in the last week but length in global wheat markets, particularly in the EU and US, have also put these prices under pressure.

A CIF-Marmara 11.5% protein wheat trade was concluded Monday for March shipment at $233/mt; Wednesday saw another trade at $233.50/mt, while CIF-Samsun, which normally trades at a $2 discount to Marmara, also traded at $232/mt.

CIF-Marmara 12.5% protein wheat traded Tuesday at $238/mt, only to trade Wednesday at $237/mt.

"Many sellers are selling cheaply [as they are operating at negative margins] to get rid of their [stocks, which are now selling at a] loss," a source said, adding that buyers are full for March.

While selling has picked up in the last week due to a number of tenders across the Middle East and North Africa, including Egypt's 360,000 mt wheat purchase Wednesday.

"I am bearish -- prices are set to fall further," a source said.

Freight markets have also suffered in this period due to a lack of cargoes to move. The rate between Azov to Marmara was fixable Wednesday at $18/mt, falling $9 on the month but unchanged from February 11.

This market is hugging eight-months lows and without any additional parcels to move could see further drops in the coming weeks, sources said.

One factor that could further stifle trading to Turkey in the coming weeks is local elections on March 31.

This could increase volatility in foreign exchange markets and therefore raise replacement costs through a weaker lira.

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