Sergey Feofilov: the recovery of demand stimulates price growth in the wheat market

The wheat market revived in the last few days due to recovering demand; a number of major tenders were held. Port data indicate a 36% month-on-month gain in March wheat shipments from Russian ports and a 63% surge from Ukrainian ones.

What is the outlook for demand for Black Sea wheat this and next seasons? 

Because of shrinking stocks, UkrAgroConsult forecasts further decrease in Ukrainian wheat supply in April-June.

The Russian share in wheat supplies to the world market is going to expand, stocks in Russia remain at a fair level (as of March 1, growers held 14% more wheat than a year earlier). The reason consists in appreciably slower wheat exports from Russia this season (15% behind last year).

Our forecast for further Russian wheat exports is optimistic: the fall in crude oil prices is pressuring the rouble, domestic prices are on the rise, and it makes financial sense for Russian farmers to accelerate grain sales shortly.

The risks related to this scenario include the necessity to take into account panic-driven behavior of consumers and contradictory decisions by the executive authorities. Exports of groats were restricted last week, but Rosselkhoznadzor (Russia’s Service for Veterinary and Phytosanitary Surveillance) has vetoed this decision now. Such uncertainty may curb growth in supply. At the same time, any probability of wheat export restrictions is ruled out.