Miller Magazine Issue: 138 June 2021

62 COVER STORY MILLER / june 2021 this proverbial kiss of death new crop sales of Russian grain have been practically dormant. Rumor has it, that exporters will be able to fix the tax by paying in in ad- vance. However, this does not shed any light on how Russian exports will shape up in the first quarter of the season. Nominal Ukrainian new crop 11.5 pro values are around $250, which is up 25% from a year ago. Baltic 12.5 pro wheat is aggressively priced to sell at $250 at about $10 per ton discount as compared to nominal Russian values. Supported by strong demand for dry bulk carriers, on top of recovering bunker prices, ocean freight costs across all main grains and oilseeds origins rose steeply during the past twelve month. IGC Grains & Oilseeds Freight Index (GOFI) increased sharply to 183.6 points in mid-May 2021 as compared to 72 a year ago, led by Southern hemisphere exporters, most notably Australia. Currently freight rates from the deep-water ports of the Black Sea are very high, and grain traders must pay up for freights amid falling grain prices. A lineup of vessels has built up with over 600 KMT of Russian wheat under loading in anticipa- tion of the decrease of the Russian export tax (from 50 Euros to 28 USD) and this does not help to bring freight rates down. In view of the above, lower FOB wheat prices do not immediately translate in cheaper CIF prices for consumer at destination. Consequently, the consumers are put off by the absence of lower offers given the obvious drop in FOB levels and are not in a hurry to extend coverage. The projection for global wheat consumption is well supported by projected growth for food and feed, including in China (see above IGC graph for Wheat: World feed use). With such a solid floor underpinning the prices, one cannot argue that grain markets are dull. They change constantly and lead market players to continuously rethink scenarios and to choose workable strategies, which are adapted to the environment. For the next two months or so we will be navigating in the weather mar- kets looking for direction in the murky waters of uncer- tainty over the pricing and marketing of Russian wheat. At the moment there is not much of a Russian export program for July-September whereas farmers, in Rus- sia and elsewhere, are getting ready to sell wheat. The game of push and pull between the farmers and the consumers will determine the prices in the short run. Wheat markets will continue to be anything but bor- ing. A seasoned wheat consumer should not be fooled by ample supplies, and should procure cover on the breaks and if and when long-awaited harvest pressure materializes ahead of projected record demand.