Wheat Prices May Slump on Harvests, Stockpile Release

Global wheat prices may plunge 14 percent in the next few months as new harvests enter the market, or sooner if Russia releases its stockpiles, the nation’s second-largest exporter said.

The average world export price may decline to $150 a metric ton from $175 a ton now, Chris Vanhonacker, commercial director at Rosinteragroservis, known as Rias, said in an interview in Singapore today. “It will be the biggest catastrophe” for the wheat market if Russia releases 3 million tons from its stockpiles, he said.

Wheat has slumped 62 percent from a record $13.4950 a bushel two years ago as farmers increased plantings, boosting competition between the U.S., Canada, Russia and Australia. Russia plans to export as much as 3 million tons of grain from its inventories, Emmanuel Jayet, the head of agricultural research at Societe Generale SA, said this week.

The volume released from intervention stockpiles, when decided by the government, will be “conservative,” and the government will take steps to ensure it “will not influence” global prices, Deputy Agriculture Minister Sergei Korolev told reporters in Singapore today.

The U.S. Department of Agriculture raised its global wheat output estimate to 677.4 million tons on Feb. 9 from 676.1 million tons a month earlier as it increased its outlook for harvests in Argentina and Ukraine. The previous crop was a record 682.7 million tons.

Russia Share

Russia, the third-largest wheat exporter, plans to increase its share of global trade as exports may advance by as much as 32 percent in the next five years, Russian Grain Union Chairman Arkady Zlochevsky said in an interview in Singapore today.

The country aims to expand shipments to as much as 25 million tons from 19 million tons this year and will target a larger share of the Asia market, he said. Asia represents 25 percent of global wheat imports, according to the U.S. Department of Agriculture.

Russia is seeking long-term supply contracts with buyers in Asia, Korolev said. The country is in talks with Japanese buyers and aims to ship at least 1 million tons a year to the Asian nation once port facilities are completed, which may take two years, he said.

Bangladesh

State grain trader United Grain Co. is in talks to sell 300,000 tons to Bangladesh, which may come from inventories the government built up by buying from farmers, Korolev said.

United Grain Chief Executive Officer Sergei Levin said last month the company may ship as much as 4 million tons of stockpiled grain this year. Wheat for May delivery on the Chicago Board of Trade dropped 1.2 percent to $5.0750 a bushel at 7:11 p.m. Singapore time today.

Luzi Ann Javier
Bloomberg