I’ve attached 2 charts to look at this morning. I like to convert international values to a common point to make a fair comparison to local values. I’ve taken international wheat values C&F east Asia and converted those values back to a rough XF LPP comparable price.
There are a couple of things that stand out. The first is the obvious, what has happened to Black Sea values since the shipping restrictions. Black Sea values were already cheap, once execution cost went up, the FOB price went down and then when execution became almost impossible the FOB price fell further.
Now they are talking about railing wheat 3000km to their northern port and shipping it around the Nordic states and into the Middle East. That would require two things to happen for that to be remotely financially feasible. The price of international wheat would need to stay high, and the price of Russian domestic wheat would need to fall, or the government would need to subsidise freight, ocean and rail, to make it remotely competitive on a C&F consumer basis.
A possible scenario is that the price of Russian domestic wheat will fall further, the government will intervene, buying domestic wheat and carrying the stocks forward and Russian producers will be forced to sow much less wheat in 2026-27.
This doesn’t solve a lot in the mid to long term, it builds stocks. If Russia can only export say 15mt in 2026-27, it cuts international wheat availability down by 20mt-30mt. That’s a lot, and doesn’t leave much of a buffer if something happens to the Canadian spring wheat crop, or the Aussie or Argentine winter wheat crops. Current industry estimates for Russian exports still stand at 41+ million tonnes for now.
The other thing that stands out on the chart is the big difference between US Club White Wheat and HRWW out of the PNW. This should be a of some concern to those that grow APW1 type wheat and only have access to export markets.
Tonight’s WASDE report may shed some light on Russian exports in the short term, perhaps not. Recent announcements from Russia hint at no near term solution to the attacks on ships that are expected of concealing weapons heading to Ukraine, and Ukraine continue to hit Russian ports.