Black Sea export wheat market pressured by slow demand as buyers opt for competitive origins

Buyers opting for the cheapest origins

The Black Sea wheat market is currently facing pressures from cautious buyers who are holding off on purchases, anticipating further price declines to offset the increases seen since the start of the year.

Since January, export prices for Russian 12.5% wheat have surged, peaking at FOB $254/mt last week. However, since then, prices have decreased by 2.36% to $248/mt on March 5 for loading in April.

Export margins for Russian wheat are shrinking due to rising local costs, and many farmers are reluctant to sell and may keep their goods until the new crop.

A Russia-based trader indicated that the break-even price for exporters without integrated operations is around $255/mt for the 12.5%, while a UAE-based trader suggested it could be as high as $260/mt.

These elevated costs have created a standoff between sellers aiming to maintain profitability and buyers who are unwilling to purchase at current price levels.

“[The FOB market] could easily lose $10-$15 by April,” a buyer of Russian wheat said.

“We haven’t been buying Black Sea because the prices are high and don’t make sense for us,” another buyer added, opting instead for some high-protein Canadian and Australian wheat.

Platts assessed FOB spot Canadian Western Red Spring Wheat 13.5% at $255/mt and Australian Premium White wheat at $258/mt for loading in May/early June on March 4.

Local prices in Russia remain high at around Rb18,000/mt, particularly in central regions where there is a demand for high-quality wheat from local bakeries and flour mills. Supply is limited in the southern regions, where 12.5% protein wheat is concentrated, while the Ural and Volga regions have higher volumes but lower quality wheat.

Russian wheat exports are projected at around 7 million mt from March to June, according to local Russian analysts. Significantly below the allocated quota from Feb. 15 to June 30 of 10.6 million mt, according to Russia’s agriculture ministry, with concerns about a potential quota shortfall.

Sellers said this issue is particularly significant for smaller exporters with quotas of 250,000-300,000 mt, unlike larger exporters with quotas of 1 million-1.5 million mt, who are more adept at navigating such situations.

“It’s very quiet, and origination is extremely slow. If offers rise for April, I doubt the bids will follow suit, especially with the futures market declining,” one seller said. “Farmers need to better understand what the new crop will look like.”

Some Russia-based traders are even selling to Egypt at discounted CIF rates to generate cash flow. In January and February, Egypt imported 1.74 million mt from Russia, along with 343,000 mt from Ukraine and 145,000 mt from Romania and Bulgaria, vessel lineups from traders showed.Freight rates from Russia to Egypt are currently at $14/mt, traders said.

Similarly, the 12.5% Constanta-Varna-Burgas wheat, a close competitor of Russian origin, is facing the same challenges.

“Origination prices are higher than the FOB prices,” a local trader said.

Typically, this market trades at a premium to its Russian counterpart at $9.50/mt, as Platts data from S&P Global Commodity Insights showed March 5 last year, but now it has fallen to a 50 cents/mt discount. TheCVB lower protein wheat at 11.5% is trading at a $5/mt discount.

Platts assessed Ukraine 11.5% at $239/mt, down 1.24% week on week. There is limited demand for back-to-back business with Bangladesh and for some traders who previously sold to Algeria are now covering shorts, one trader said.

The CVB market is often linked to MATIF futures that have weakened by over 4% for the May contract as buyers remain cautious, largely due to improved weather conditions in the Northern Hemisphere and reduced risks in the US Plains and Europe, which have also contributed to declines in CBOT futures.

“We have the March MATIF contract expiration approaching. Some traders are rolling positions to avoid physical deliveries, which could impact the market,” a second trader.

The competitiveness of the CVB market to Russian wheat is leading to increased flows for CVB wheat to traditional Russian wheat buyers. For example, since the start of the year, vessel lineups from the Port of Constanta, which also includes some Ukrainian, Serbian and Moldavian-origin wheat, show more exports to Egypt, Morocco, and Nigeria compared with the same period last year.

Russia generally exports around 5 million mt/month, but February exports were only 1.9 million mt, with around 1.6 million mt projected for March, marking the lowest levels since the 2020-2021 period, according to Russian analysts. The decline in exports is due to lower production hit by frosts and droughts at 8.6 million mt less year-on-year.

“We’re somewhat fortunate that the Russians are not being overly aggressive due to political reasons, which is allowing more opportunities for Romanian wheat sales,” one local CVB trader said.

Some buyers are opting for EU wheat to avoid the complications of bank financing for Black Sea vessels, which are hesitant to engage with Black Sea origin wheat due to high war risks.

The Russian government also imposed an unofficial price floor and urged for Russian wheat to be exclusively sold by Russian companies to state buyers.

Specifically, Morocco saw increased soft wheat imports from the Baltics over January-February, totaling 235,500 mt from Latvia and Lithuania and 239,800 mt from Bulgaria and Romania.

In contrast, traditional markets like France fell short at 43,740 mt due to low crop yields and reduced exports, with no vessels arriving from Russia and Ukraine since the beginning of the year, according to data from the Fédération Nationale des Négociants en Céréales et Légumineuses. Some German wheat was also being shipped to Morocco, amounting to 49,288 mt.

“French wheat is the least competitive in terms of quality and price. CVB is a good option, as well as Baltic wheat,” a trader in Casablanca said. “Some Russian and Ukrainian wheat is being offered, though not in large quantities.”

Tags: Russia, Bulgaria, export, Romania, prices, Black Sea region, wheat, Ukraine