Russian wheat price at three months high amid drought and supply cuts

The Russian wheat market has surged to the highest price since late June amid worsening drought and reduced production forecast in the world's leading export country. The wheat price rose as much as 4.3% in just the last two weeks alone, and is now the highest price since June 26, 2024. As per a report by S&P Global, Russia's 12.5% protein content fetched a price of $228.50 per metric ton for the end of October to the first half of November loading.

Recently the Russian regions of Oryol declared an emergency on extreme drought conditions. This followed after multiple regions were already hit by frosts and more droughts since early May, which cut down the Russian wheat 2024-25 production and as a result the export potential for the season. Russia is expected to harvest 82.1 million metric tons of wheat in 2024-25 and set to export 47 MMt.

Traders said the drought is hindering wheat sales from Russian farmers, leading to dwindling liquidity, which is also likely to impact the next winter planting for the 2025-2026 wheat crop. Referring to a seller, the report says that there is a dangerous situation for the crop's next season, there hasn't been any rain. Russian exporters are under pressure to reduce shipments, prompting calls for export restrictions. 

Egypt continued to be a top buyer of Russian wheat, buying 1.4 MMt in September. Egyptian buyers are increasingly focused on Russian prices, which are considered more competitive than those of Ukrainian wheat. A much higher protein 12.5% Russian wheat was priced at $236/t CIF Alexandria port, compared with Ukraine's 11.5% at $245/t as of Oct 2. Ukraine has so far exported 6 MMt of wheat this season, with a total of 2.18 MMt in September, with the top customers being Indonesia, Vietnam, and the Netherlands.

Buyers do not prefer Ukrainian wheat as it is more expensive. Also Asia and the rest of the Middle East North Africa region is looking at Russia. Ukraine's 11.5% wheat saw a similar increase, rising 2% over two weeks, reaching its highest level since June 17, 2024.

Egypt's state board, GASC, is actively seeking to secure wheat at reasonable prices, while Saudi Arabia's GFSA aims to purchase at least 300,000 tons of wheat for December 2024-January 2025. Additionally, Morocco is expected to buy more Russian wheat than French this season, as France, which used to be its primary supplier, is expected to export significantly less due to crop damage from rain.

In Turkey, millers are awaiting an announcement from the ministry on whether imports are allowed to resume after Oct. 15. Turkey banned imports of wheat from June to mid-October to protect local production. Buyers said they expect the ban to be postponed until the end of the year on high local wheat stocks. However, most millers have been pushing for the ban to be lifted amid quality concerns of domestic wheat.

Elsewhere, the Romanian and Bulgarian wheat markets have been trying to compete with Russian wheat. Romanian farmers tried to capture the higher prices of wheat.