Kateryna Mudriian
Chief Analyst
ASAP Agri
Implementation of Turkish wheat import ban on 21 June 2024 was a heavy bearish factor for Black Sea wheat and freight market. Since the end of August wheat prices started recovering on the cuts of wheat crop in the EU (with accent on France) and Russia. In the beginning of September rumours appeared that Turkey may remove wheat import ban, if local millers to cover 50-70% of their needs from TMO’s stocks. And at the beginning of October the situation became clearer. Do we expect some additional support for Black Sea wheat prices from Turkish regulations? For this question we got comment from Gözde N. Karagöz and Salih Karagöz - Commodity Brokers at Atria Brokers.
Relief in Turkish wheat regulation? – Not much…
In Turkey, a major wheat importer, recent policy changes are adding another layer of complexity to the market. On 3 October 2024, the country announced about introduction of a new allocation system for wheat exports, replacing a full export ban. To further explore these developments in Turkey’s wheat import regulations and their impact on the Black Sea wheat market, we turned to Gözde N. Karagöz and Salih Karagöz, commodity brokers at Atria Brokers, for their expert insights. Below, they address key questions surrounding the new allocation system and its implications for Turkish millers and the broader market.
What this system includes?
Gözde Nur Karagöz
Broker at Atria Brokers
Gozde Nur Karagoz, broker at Atria Brokers: Following recent discussions with Turkish Grain Board officials, it has become clear that Turkey does not plan to fully lift the wheat export ban. Instead, a new allocation system is being introduced. Under this system, exporters of processed grain products (millers) will be permitted to import only 15% of the amount used for their exports, with the remaining 85% sourced from Turkish Grain Board (TMO) stocks. TMO will set the price for these wheat sales, with market expectations suggesting it will be around 250 USD per metric ton.
Have you already heard if some prices were already announced?
Gözde N. Karagöz: As of 04 October, TMO announced next prices for Thrace Region (Edirne and Kırklareli): for feed wheat 225 USD/MT, 3rd group 235 USD/MT and 2nd group 240USD/MT.
Will it make the life for Turkish millers easier? What is the deadline for this system?
Gözde N. Karagöz: Market participants remain uncertain whether this measure will significantly ease the burden on millers. The new system, which is expected to remain in place until the end of the year, has left traders cautious. The limited import allowance and continued reliance on TMO’s stocks raise concerns about long-term supply sustainability, and the market remains divided on whether this will stabilize prices or exacerbate pressure on millers. And as a result, Turkish wheat ending stocks 24/25 could be at the 3-year low, as per September WASDE.
Will this new rule impact on wheat prices in the Black Sea?
Salih Karagöz
Broker at Atria Brokers
Salih Karagöz, a broker at Atria Brokers: It is unlikely to act as a factor in support of wheat prices in the region. With this rule, in order to import the minimum volume of wheat of about 3 KMT, it is necessary to buy and take from TMO warehouses a fairly large volume of 17 KMT of wheat. Not every company can afford this. Since the publication of the ban on wheat imports to Turkey on 6 June 2024 (with the entry into force on 21 June 2024), and until the end of September 2024, Russia has supplied about 850 KMT of wheat to Turkey. Some of it went into transit (export to other countries), and some remained in bonded warehouses in Turkey. Therefore, if wheat is imported, it will most likely be the one that is currently in bonded warehouses. Accordingly, no new surge in demand is likely to be expected. At the same time, the costs of Turkish operators for storage and customs formalities hit the budget of processors.
Which factors feed the wheat bulls?
Salih Karagöz: With 83% of wheat harvested in Russia, expectations are that further yields will decrease, as the remaining areas - Siberian regions - were impacted by unfavorable weather. Simultaneously, dry conditions in southern Russia are delaying winter wheat planting, with the pace at an 11-year low. However, there is some hope as weather forecasts predict possible rain in the middle of October. This could help the wheat reach an important growth stage, which is crucial for surviving the winter and growing properly in the spring.
The latest report of the Union of Grain Exporters of the Russian Federation puts wheat crop in 2024 at 83.4 MMT and wheat export at 43.5 MMT. As per Platts data, Russia is expected to harvest 82.1 MMT of wheat in 2024/25 MY and set to export 47 MMT. Which generally corresponds to September USDA report with 83 and 48 MMT respectively.
We heard that in general, quality of wheat crop in Russia is worse this season?
Gözde Nur Karagöz: Russian wheat quality was considered normal until recent weather issues emerged. This year, there may be an increase in 11.5% protein wheat, but concerns have risen about sprouted kernels due to recent rains in crop areas. In general, traders noted that the test weight this season is in more case 77 kg/hL vs. 78 kg/hL last year.
Australia and Argentina navigating tough weather for wheat production
In Australia, severe frosts are threatening wheat crops in southern and southeastern regions, adding to concerns about dry conditions in the western areas. Recent adverse weather in New South Wales, Victoria, and South Australia has prompted analysts to lower the wheat harvest outlook to as low as 27 MMT, a stark revision from earlier projections. The USDA initially forecasted wheat production in Australia at 32 MMT, but adjustments are likely in the upcoming October report as local analysts continue to revise their estimates. Also, in September report USDA pegged Australia’s wheat export at 25 MMT vs 20 MMT LY.
Argentina is facing its own crisis, with a lack of rainfall leading to the abandonment of some fields. The total area planted with wheat has reached 6.3 MLN HA, but ongoing dry conditions threaten to reduce this area and crop prospects. USDA in September report forecasted the crop at 18 MMT and export at 12 MMT.
Ukrainian wheat is facing tough competition in Greece
These global developments are having a significant impact on Ukrainian wheat exports. Ukrainian 11.5% wheat prices are finding support from the unfavourable weather conditions in competing countries. However, recent market trends suggest that Ukrainian-origin goods are losing competitiveness against EU-origin products in some markets, such as Greece.
In discussing the competitive landscape for Ukrainian wheat in Greece, Gözde N. Karagöz, Broker at Atria Brokers, notes that recent price increases for Ukrainian wheat have prompted Greek buyers to shift their focus towards wheat from Moldova and Romania. This shift has left Ukrainian products facing limited demand, causing Greece to lose its position as the fourth-largest wheat importer compared to the same period last year.
Ukrainian wheat price: Further into space?
Since end of August 2024, Ukrainian 11.5% protein wheat increased gradually by 15 USD to about 229 USD/MT FOB POC. Most jump was noticed in the first week of October. Such increase of price maintains reserved buying by major importers. Herewith, current prices of Ukrainian 11.5% wheat are significantly lower compared to MATIF, which may stimulate some demand from buyers. However, overall demand remains sluggish, reflecting the uncertain and complex nature of the global wheat market at present. ASAP Agri analysts expect more 11.5% protein wheat export from Ukraine in the second half of the season, after finalization of corn programs by biggest players. In addition, Ukrainian feed wheat market is supported by corn segment.
ASAP Agri is moderating a corn panel at Global Grain Geneva in November 12-14. Within the panel we will discuss the contrast in supply: Black Sea vs Americas, opportunistic behaviour of importers and switch from corn to feed wheat for livestock feeding.