Turkish wheat import ban pressed prices beforehand harvesting

11 July 20248 min reading

Christina Serebriakova

On 06 June 2024, the government of Turkey introduced a ban on wheat import for the period from 21 June 2024 to 15 October 2024. The measure is taken to protect local farmers during the harvesting period. The government noted that the ban may be extended if needed. This decision is the most harmful for Ukraine and Russia, as Turkey is the key market for these two Black Sea exporters, and Turkey usually covers virtually whole its import demand from these two origins. The prices immediately reacted with decline of 10-15 USD/MT per week, and both Black Sea origin will look for other markets for its wheat, raising competition further before the start of harvesting campaign.

Prices reacted in bearish tone

Inna Stepanenko

According to Inna Stepanenko, chief analyst of ASAP Agri, the ban on import of wheat to Turkey pressed the prices both in the Black Sea and on the global arena. 

CBOT wheat futures reacted with bearish trend, as the Turkish decision raised concerns about global demand for the grain and strengthening of competition on the market at the time of harvest pressure. On 07 June, right after the ban news, Jul CBOT wheat contract lost 4.4 USD/MT to 230.5 USD/MT. In total, within a week after the ban announcement Jul CBOT wheat contract lost 20 USD/mt.

Offer prices of Ukrainian 11.5 milling wheat fall as well. On FOB POC basis, the offer prices were at 242 USD/MT as of 07 June, and they decreased to 230 USD/MT by 14 June. Buyers’ ideas declined by 10 USD/MT to 226 USD/MT over the same period.

The same trend was observed on FOB Danube basis, where offer prices of 11.5 Ukrainian milling wheat decreased from 238 USD/MT as of 07 June to 229 USD/MT as of 14 June. Buyers’ ideas lost 10 USD/MT to 220 USD/MT over the same week.

For feed wheat, offers from Ukrainian sellers in FOB POC basis decreased from 228 USD/MT as of 07 June to 211 USD/MT as of 14 June. On FOB Danube basis, offers declined from 225 USD/MT to 212 USD/MT over the same week.

Redistribution of trade flows: Ukrainian exporters have to fight for buyers

In 2023/24 MY, Turkey is estimated to reduce wheat import to 9.5 MMT, down sizably from 12.1 MMT in 2022/23 MY, according to the USDA. Smaller purchases are based on sizable growth of Turkish wheat crop in 2023/24 MY that increased to 20 MMT, from 17.3 MMT in 2022/23 MY. In 2024/25 MY, USDA forecasts another big crop of wheat in Turkey at 19 MMT. 

Talking about 2023/24 MY, smaller Ukrainian crop combined with lower protein content that affected deliveries of Ukrainian wheat to Turkey. ASAP Agri estimates, that the share of 11.5% protein and higher protein wheat in Ukraine in 2023/24 MY is only 35-40%. In case we talk about USDA’s June report crop vision – out of total 23 MMT – less than 9 MMT could be 11.5% protein and higher protein wheat.

Therefore, Turkish millers started to cover bigger portion of their demand with Russian origin that is difficult for Ukraine to compete with in terms of quality. Russian exporters offer not only 12.5% protein wheat with test weight mainly minimum 78 kg/hl, but even 10.5% wheat with 77 kg/hl test weight. While Ukrainian sellers offer 11.5% or 10.5% protein wheat with test weight at 76 kg/hl. Ukrainian parameters are worse than they were last year, when the offers of 12.5% protein wheat with 77 kg/hl TW were present. 

As a result, Ukraine’s share of Turkish wheat pie dropped from 28% in 2022/23 MY (Jul-Feb) to 16% in the current season (Jul-Feb). Ukraine exported only 1.1 MMT of wheat to Turkey in Jul-May 2023/24 MY, down sharply from more than 3.3 MMT over the same period of 2022/23 MY. Russia exported about 6.3 MMT of wheat to Turkey in Jul-May 2023/24 MY, down from 8 MMT over the same period year earlier. 

Hope for Asian demand

The Ukrainian and Russian exporters have to deal with the absence of the key buyer until mid-October, or in the other words – at the time of harvest pressure, when the offers of new-crop wheat will fill the market up. It will strengthen the competition between two origins on other destinations.

For Ukraine, the situation to be more complicated compared to Russia. We see the strong Russian presence on Asian market this season. In Jul-May 2023/24, Russia shipped about 1.5 MMT of wheat to Indonesia, while there were no supplies the year earlier. It also exported about 3.3 MMT of wheat to Bangladesh over the same period, more than doubled from 1.2 MMT in Jul-May 2022/23 MY.

Export of Ukrainian wheat to Indonesia totaled 1.4 MMT in Jul-May 2023/24 MY, vs 385 KMT during the same period of 2022/23 MY, when the shipments to remote destinations were limited during the time of no corridor or poor performance of the corridor. Shipments to Bangladesh reached 737 KMT in Jul-May 2023/24 MY, down from 983 KMT year ago. 

EU 95 EUR/MT duty since July 2024 to polarize the trade flows

It sounded like some positive news for Ukraine is a decision of the EU to implement the prohibitive tariffs on grain import from Russia and Belarus that will came in force on 01 July 2024.  

The tariffs will be 95 EUR/MT for grains that will make it fully uncompetitive. However, with expected decline in the EU’s demand for Ukrainian wheat in the new season, the tariffs for Russian grains in the EU will serve as one more factor strengthening competition between Ukraine and Russia on other markets.

We may note that the absence of Russian durum wheat on the EU market will favor Turkey, which already took 32% of the EU durum pie in the current season. 

Also, there is almost no hope for Ukraine to keep supplying its wheat to the EU market at the same impressive pace as it is in the current season. Key EU buyer of Ukrainian wheat – Spain – is on course to harvest better wheat crop in 2024. The European Commission sees Spanish wheat harvest at 5.3 MMT in 2024, up 1.8 MMT y/y from 3.5 MMT in 2023. Italy, another big buyer of Ukrainian wheat, may harvest 3.1 MMT of wheat in 2024, up 0.1 MMT y/y. Thus, the demand for Ukrainian wheat from the key EU importers may fall by up to 2 MMT in the next season.  

Turkey farmers kick off wheat harvest 15 days earlier than usually 

This year, Turkey has started harvesting wheat much earlier than usually. The very first crops were threshed in Adana region in southern Turkey 15 days earlier, said agriculture journalist Ali Ekber Yıldırım on 03 May. 

Salih Karagöz

According to Salih Karagöz, commodity broker at Atria Brokers, wheat harvesting has been started in western regions of Turkey on 10 June. The first yield reported at quite high level of 5-7 MT/HA. Quality of new-crop wheat is reported high as well, with protein mainly at 13-14% or even higher, and test weight mainly varying between 80-82 kg/hl. 

For 2024/25 season, the USDA sees wheat production in Turkey at 19 MMT, down 1 MMT y/y. In turn, Turkish Statistical Institute pegged the wheat harvest in the country at 21 MMT in its first forecast for the country’s 2024 production.  

However, the USDA also expects quite higher carry-over stocks of wheat in Turkey in 2024/25 MY – at 4.3 MMT, only 0.3 MMT lower y/y, but notably higher than 2.3 MMT in 2022/23 MY. Thus, the country’s wheat import in 2024/25 MY is pegged at 9.5 MMT, steady y/y. 

Turkish wheat import ban hampers seasonal freight increase

Pavel Lysenko

According to Pavel Lysenko, freight broker of Atria Brokers, Turkish wheat import ban raised concerns about the revival of the Black Sea market on the eve of the new grain season. As Russia and Ukraine have been the main suppliers of the grain to Turkey, this cargo flow has also been the main driver of the Azov Sea freight market and the stop of these supplies provoked the collapse of freight rates from Russian ports. According to the rumors, the freight of sea-river vessels from Azov to Marmara has dropped by about 3-5 USD/MT from the moment the ban was announced. Such sagging of freight rates in the region is narrowing shipowners’ earnings operating from Russian ports to those they could get working from other ports in the Black Sea. It is also worth to note that freight rates from the Azov Sea basin have remained the most attractive for shipowners in the Black Sea recently; in June, certain Arab companies started to reorient their vessels to work from Russian ports amid a significant rates downturn on the Black Sea market. 

Thus, due to the crash of the Azov Sea market more and more ship owners working in the region have begun seeking opportunities from alternative Black Sea ports. This trend triggers a notable influx of 3-6k DWT tonnage on the Black Sea market, thereby, overshadowing any significant freight rates increase in the coaster segment with the start of the new grain campaign.

As per market participants, taking into account a decent wheat crop in Turkey, as well as big carry-in for 2024/25 MY, it is not excluded, that the Turkish wheat import ban will be prolonged till the end of financial year 2024.

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