IKAR in Mass and Industry Media

Wheat traders caught short by rally in Black Sea prices

Reuters

• Traders sold Russian wheat with 11.5% protein at $217-$222 C&F to Indonesia
• Russian wheat quoted at around $236/T this week to Indonesia
• Lack of Black Sea farmer selling prevented merchants from covering positions

SINGAPORE - Wheat merchants who had committed to sell to Asian millers are now facing hefty losses after an unexpected spike in Russian and Ukrainian grain prices as farmers held on to their supplies, two trade sources told Reuters.

FILE PHOTO: Sacks of wheat flour are loaded onto a ship at the Sunda Kelapa harbour in Jakarta. Photo: Reuters

Russian wheat with 11.5% protein was quoted around $236 per tonne, including cost and freight (C&F), this week to Indonesia, up from sales committed at between $217 and $222 a tonne in the last few months for August shipment.

"Farmers were really smart this year, they did not sell to trading companies in advance," said one the sources, who sells wheat at an international trading company. "When traders started covering shorts, prices started rising."

The volume of wheat sold but not covered could be a big chunk of total sales, both sources said.

"It is hard to give the exact volume of shorts but it could be as high as half of the wheat sold by traders," the second trader said. The sources, from Singapore, spoke on condition of anonymity, as they were not authorised to speak to media.

Russian wheat export prices eased last week after three weeks of gains, under pressure from the new crop harvest and a weakening rouble against the dollar, IKAR agriculture consultancy said in a note on Monday.

Black Sea-loaded Russian wheat with 12.5% protein was at $207 a tonne free on board for supply in August at the end of last week, down $3 from the week before, IKAR said.

But according to Sovecon, an agriculture consultancy in Moscow, supplies remain tight in some areas and "a few buyers need grain urgently to load approaching vessels".

Indonesia, the world's second-largest wheat importer, takes around 900,000 tonnes a month, buying large volumes from the Black Sea region. Thailand and the Philippines mainly use Black Sea wheat for animal feed.

Global wheat prices are likely to ease towards the end of the year with expectations of a bumper harvest in Australia.

"We have to wait and see, if Australian farmers also hold back supplies it could provide support to the market," the first source said.

06.08.20

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