Ukraine’s wheat prices slump on large supply, freight

Ukraine’s wheat prices have fallen sharply this month, with fob values pressured by rising freight costs amid high supplies from the world’s main exporters at the start of the marketing season, while an uptick in farmers’ new-crop sales has weighed on local prices.

The Ukrainian spot fob wheat price for 11.5pc protein grade (UW1) has dropped by $18.50/t since 1 July to close at $225/t yesterday — its lowest since Argus began wheat price assessments last October. Meanwhile, Ukraine’s spot cpt price for product (UW2) has fallen by $16/t this month to close at $208/t today (see chart).

The sharp drop in fob prices came as rising freight rates for grain exports significantly pressured the competitiveness of Ukrainian wheat in key import markets. Freight costs have risen drastically in recent weeks amid high demand for vessels at the start of the 2021-22 wheat and barley marketing season on 1 July.

The cost of freight for wheat shipments from Ukraine’s Black Sea ports to Egypt has increased to $27/t this week from $19-20/t in early June, according to market participants. Meanwhile, the freight cost between Ukraine and Bangladesh — one of the largest buyers of Ukrainian wheat — has surged to $69-71/t this week from $57-59/t a month ago.

As a result, Ukrainian wheat exporters have been forced to lower their export prices to maintain their market shares in key importing countries, amid strong competition from bumper Russian and European supplies. And the speed of the price decrease has intensified after Egypt’s GASC purchased Romanian and Russian wheat in its latest tender this week.

Romanian wheat continues to dominate in Egyptian tender purchases of 2021-22 crop wheat, with a total of 600,000t secured so far. Russian wheat bookings have made up 350,000t, while GASC has taken only 55,000t of Ukrainian wheat across its four new-crop tenders.

Ukraine’s local wheat prices have tracked the lower fob values, with additional pressure coming from a surge in farmers’ new-crop sales this week. The overall volumes offered by producers for sale have increased to 100,000t this week from about 30,000t last week, according to traders’ estimates.

This comes as many Ukrainian producers try to lock in current prices, expecting a further price decrease when harvesting starts and new crop arrives on the market. There has been a significant uptick in trading on Ukraine’s domestic market as a result, with 72,500t of 11.5 protein wheat heard to have traded on a cpt basis over the past two days.

And Ukrainian wheat prices are likely to remain under pressure from high supplies in the coming month, with a degree of stabilisation expected once the competition on the freight market decreases.

Agrus Media

Tags: Ukraine, wheat, freight, wheat price