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Current Position:Home » News » Agri & Animal Products » Topic

Russian wheat arbitrage to Asia tightens, buyers seek Argentine grain

Zoom in font  Zoom out font Published: 2018-09-21
Core Tip: The Russian wheat arbitrage route to Asia is tightening as Black Sea sellers avoid South East Asian destinations due to recently reinforced quality controls imposed by plant-health watchdog Rosselkhoznadzor.
The Russian wheat arbitrage route to Asia is tightening as Black Sea sellers avoid South East Asian destinations due to recently reinforced quality controls imposed by plant-health watchdog Rosselkhoznadzor.

The result of the more vigorous application of quality controls has tightened availability of Russian wheat, particularly 11.5% protein wheat in SE Asia, leaving more market participants interested in alternative origins such as Argentina due to more competitive pricing.

The reinforced quality controls were in response to complaints from Indonesia, Vietnam and Egypt, in particular, concerning areas such as fusarium head blight, ophiobolus root rot among other quality issues.

Market participants are "excluding sales to Vietnam and Indonesia as a result of the phytosanitary checks," a Black Sea trader said, as market participants seek to minimize disruption to their exports.

With Black Sea traders preferring to ship to other destinations, "Prices for shipments further out, such as November and December, have increased substantially," a buyer in Malaysia said, adding that the carry to each month can be as much as $10-$15/mt.

"Offers for later shipments are getting thinner -- either traders do not have cargoes or they are unable to price, given the uncertainty around Russian export restrictions," another source added.

As a result buyers in SE Asia are now looking to alternative origins.

"We have been tracking Argentine prices very closely. Currently, the prices are similar to those of Black Sea, but if there is any tightness in Russian supply and prices surge, it would make sense to switch to Argentine wheat," a miller in Indonesia said.

Offers for 11.5% Argentine-origin wheat were heard in a wide range of $225-$240/mt FOB Argentina for December loading cargoes Thursday. Russian or Ukrainian 11.5% protein wheat Panamax sized parcels for first-half December-loading, in contrast, were heard at $232/mt.

Argentine "offer levels are a bit all over the place now because of the recent announcement on export taxes," another trader in Singapore said.

The offer levels are wide because "[suppliers] can pass the [export] tax onto others," another trader added.

The Argentine government announced an export tax on wheat and corn of four pesos per dollar, roughly 10%, on September 3, as part of a raft of measures to help balance the budget.


 
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