Russia's surging wheat exports help revive interest in Black Sea futures

The Chicago Mercantile Exchange said Dec. 15 that the Black Sea wheat futures has seen its first trade since the summer, as a perceived reduction in the reputational and financial risks of buying wheat from Russia brings more companies back to the market.

Russia is the world's largest wheat exporter and each month's Black Sea wheat futures contract settles against the average of Platts price assessments for Handysize parcels of 12.5% protein wheat.

Platts is part of S&P Global Commodity Insights.

A representative of the CME said 500 lots, equivalent to 5,000 mt, in the March 2023 contract had traded on Dec. 13 at $313/mt.

Following Russia's invasion of Ukraine in February, the difficulty of arranging financing, insurance and shipping discouraged many international traders from buying grain from the country and saw market participants cut exposure to the futures contract. In the summer, fears also grew about the possible reputational risk from inadvertently handling grain stolen from Ukraine.

That position began to change after Russia reported a bumper wheat harvest in July and made the export tax less onerous. Since then, the country's wheat sellers have often provided the lowest offers for the major wheat importers in the Middle East and North Africa, such as Egypt's state grain board GASC.

The US Department of Agriculture puts Russia's 2022 wheat crop up 21% year on year at 91 million mt. It expects Russia's exports for the marketing year 2022-23 (July to June) to be up 10 million at 43 million mt, a fifth of the global total.

Early in December, some traders had said they expected Russia to export as much as 5 million mt of wheat in December, but they have since reduced that estimate due to limits of the rate of loading when it is snowing or raining at the ports.

Platts on Dec. 14 assessed a Handysize parcel of Russian 12.5% protein wheat at $311.5 for shipment from Jan. 11 to Jan. 25, down $2.5/mt from the previous session.