Russians create a picture as they allow Ukrainian grain exports but in fact, they did not. If we compare the numbers of vessel inspections since the beginning of Grain Corridor we will see, that now Ukraine is on the same level as in the very beginning. But what has changed – its volumes. This led to requirement to load bigger vessels instead coasters. BDI fell to a more than two-month low last Friday and posted a weekly decline as demand for capesize vessels dropped

Rumors of further sales of French wheat to China and of possible sales of northern European wheat to the United States underscored how U.S. wheat was uncompetitive globally.  Prolonged drought conditions in Argentina have the country’s Buenos Aires grains exchange slashing its estimates on wheat for the 2022/23 season by nearly 40% to 12.4 MMT.  Argentina’s Economy Ministry estimates the wheat crop at 13.4 MMT for 22/23, a 39.4% drop from 21/22. Harvest is 10% complete through November 16. In this context, Argentina will only export 6.5MMT of wheat in 2022-23 according to the Rosario Board of Trade, down from last week’s prediction of 7MMT (5-year average of 11.7MMT). And this forecast is optimistic, the worst one is around 10MMT of production.

The European Union’s soft wheat exports so far in 2022/23 are 13.25 MMT, according to data from the European Commission. That was nearly 10% ahead of the same time a year ago. France remains the largest wheat exporter at 5.46 MMT, while Romania, Germany, Latvia, and Poland followed, shipping less than 2.0 MMT each since the July 1 export calendar began. Meantime, the French farm office FranceAgriMer reported that 97% of the country’s 2022/23 soft wheat crop has been planted as of November 14. The EU has greatly increased shipments of wheat and barley to the MENA countries. In July 2022, the EU exported 1.9 MMT of wheat to MENA, which is 300% higher YoY. In total, July wheat exports from the EU reached 3 MMT, which is 74% more YoY. Such pace of shipments means that France’s export potential for wheat by December may be almost completely exhausted. According to the EC, by November 20, France had already exported 5.6 MMT of wheat (soft and durum) outside the EU, which is 1.6 times higher YoY. The export potential from France to countries outside the EU is estimated at 10 MMT in 2022/23. Taking into account the sale to China with delivery in December from 8 to 10 Panamaxes with French wheat (up to 600 thousand tons), some of which will most likely move to January 2023, 7.5 million can be shipped in the first half of the 2022/23 season. In 2021/22, the volume from July to December was 54% - 4.6 MMT out of 8.5MMT.

Australia has accounted for 63% of China’s wheat imports during the first 10 months of 2022, compared to 28% over all of 2021 and just 15% in 2020, Bloomberg reported, citing Chinese customs data and its own calculations. China’s imports of Australian wheat reached 4.97 MMT in January through October, the highest ever in data that goes back to 2004. Remember the rule “follow China”.

Egyptian GASC purchased wheat through direct negotiations for the fourth time in a row. If earlier only Russian wheat was purchased in the amount of 640 thousand tons, on November 24 it was purchased 140 thousand tons from Russia and 35 thousand tons from Ukraine at a price of $361/t CNF. A week ago, on November 17, GASC purchased 300 kt of Russian wheat from two Russian-linked traders Solaris (240 kt) and Aston (60 kt) at a price similar to the purchase price two weeks ago - $362/t CNF with delivery on December 22 and January 2023.

Thus, for almost 5 months of the new season, Egypt, represented by GASC and private buyers, purchased in Russia, taking into account the volumes already delivered, almost MMT. Imports in general for the entire 2022/23 season are forecasted by the US Department of Agriculture which Russia can supply at the current rate up to 8MMT. These volumes are close to the levels of 2020/21 (8.3MMT) and 2017/18 (8.6MMT), when total Egyptian imports were generally higher - at the level of 12-12.5MMT per season. 

As we can see, despite the unprecedented harvests declared by Russia, in percentage terms, the demand for grain from a state recognized by the European Parliament as a sponsor of terrorism does not meet the expectations of Russian politicians. This led to record stocks of grain in Russia. Wheat stocks in agricultural organizations (excluding small forms) as of November 1, according to Rosstat, still remained at a record level of 29 MMT- almost 1.5 times higher YoY. The previous record of 22 MMT was set five years ago, in November 2017. Russian 22/23 wheat exports forecasts: IKAR 44mmt, Sovecon 43.7mmt, Rusagrotrans 43.5mmt, ProZerno 43.5mmt, Russian Grain Union 42-43mmt, WASDE USDA 42mmtm, IGC 41.1mmt, Russian MinAgri 41.1mmt.

Russia continues to look for tools to bribe buyers and manipulate the market in order to sell as much grain as possible and make the maximum number of countries dependent on Russian commodities. Fixing the rate of the duty in the event of the sale of grain for export through exchange trading will return to the practice of long-term planning of operations and make exports more transparent and predictable, said in the Union of Grain Exporters.

Earlier, the First Deputy Prime Minister of Russia instructed the Ministry of Finance, the Ministry of Agriculture, the Ministry of Economic Development and the Ministry of Foreign Affairs of Russia to work out the issue of providing interstate targeted loans in rubles to friendly countries by the end of 2022 for the purchase of Russian agricultural products. In addition, foreign companies and government agencies that purchase food directly will be able to open bank accounts in Russian banks under a simplified scheme, receive access to exchange trading and clearing for transactions, conversion operations and settlements.

According to Russian officials, all friendly countries could potentially show interest in exchange trading in Russian grain with state support, since consumer credit for the purchase of goods is a standard trading practice. It looks like a childish trick - “who will be friends of mine - he will get a big and sweet candy.” But what side effects it has – we can only guess.

At the same time, a reduction in export duties on grain or an increase in the “cut-off price”, which was previously discussed in the State Duma of Russia, “neither in the framework of the project of exchange export trading nor separately discussed.”

In addition, there were even mentions in the press of a possible transition to trading for cash dollars - literally in suitcases - as in the movies of Guy Ritchie. The country is short of cash dollars as a result of the sanctions.

Iran, according to UN FAO estimates, will increase grain production in 2022 by 16% compared to last year, to 19.5MMT. Wheat production will increase from 10.4 MMT in 2021 to 13 MMT in 2022, while the average annual indicator in 2018-2020 will be 14.3 MMT. Wheat imports are projected to decline from 7.9 MMT in 2021/22 to 5 MMT in 2022/23, with an annual average of 5 MMT from 2018/19 to 2020/21. Iran slows wheat imports from Russia, which provides about 2/3 of external supplies, which is clearly visible this season. In July-October 2022, Russia exported to Iran almost 2 times less than a year ago at around 1.8 MMT of wheat, despite Iran’s publicly declared ambitions to become the largest buyer of Russian grain.

Many banks in Bangladesh have reined in opening most of the letters of credit, including for importing daily necessities, due to the ongoing crisis of foreign currencies in the country. Even with the dollars coming from remittances and export earnings, the bank authorities are unable to pay their import payment obligations and foreign debts of their customers. Not only that, bank officials are even hesitant to open LCs worth $200,000 to $300,000. There are problems with payment over Iranian contracts as well. High commodity prices have led to an increase in India’s wheat and canola acres, which are up 15% year-over-year, per the latest data from the country’s farm ministry. Indian farmers have planted wheat on 4.5 million hectares since October 1, up 9.7% YoY, according to data from the Indian farm ministry. Per the latest data from the Ag Ministry wheat was planted on 10.1Mha as of 18 November, up from last year’s 8.8Mha. Hot weather in March severely affected the 2022 crop and curtailed plans for Indian wheat exports while driving local prices up 27% since May. Inventories are at a multiyear low, creating an additional incentive to replenish domestic stocks. Late rains in October and November increased soil moisture boosted planting, said growers. 

Looks like it became less room for wheat on the market. But this is not a movie. It’s a show. See you at the next Episode.