HAMBURG/PARIS, April 6 (Reuters) - Russia’s wheat exports are picking up pace after an initial slowdown following the country’s invasion of Ukraine, with lower prices than many of its rivals helping secure sales.
Global wheat prices rose sharply following Russia’s invasion of its European neighbour on Feb. 24, driven by fears that the conflict could deprive the world market of supplies from the two countries, both of whom are major grain exporters.
While such fears proved justified in the case of Ukraine, where ports remain closed, Russia has seen strong sales despite payment issues, helping to fill the void in the global wheat market left by lost Ukrainian shipments.
Russia and Ukraine account for about 29% of global wheat exports and are the key suppliers for some of the world’s top buyers, including Egypt and Turkey.
Having experienced a steep rise in the cost of importing fuel, many buyers are under pressure to limit as much as possible the hike in their grain import bill.
“Russian exports are certainly on the increase. The big export port of Novorossiisk was never closed and flows are moving out,” one European trader said.
“Russian wheat is looking cheap and some importers face huge increases in their costs if they turn to alternatives like the EU, the U.S., Canada, Argentina and Australia, all of whom are more expensive than Russian wheat,” the trader added.
Egypt saw a spike in Russian wheat imports in March, receiving 479,195 tonnes, a 24% increase from the same month last year, according to freight data seen by Reuters.
“New deals are being made by importers in countries like Egypt, Turkey, Syria, Iran, Lebanon and Libya. Some smaller countries suddenly facing big import bills are also trying to buy,” another European trader said.
Sovecon, one of the leading agriculture consultancies in Moscow, said high global prices and a period where the rouble was very weak had helped exports in the second half of March, adding that “an additional factor is that some wheat demand had to switch from Ukraine to Russia.”
There have been payment issues, with some Russian banks excluded from the SWIFT system and international banks unwilling to finance purchases of Russian wheat.
“This is especially the case with banks in Switzerland which have traditionally financed a large part of the Russian grain export business. EU banks are also not willing to finance Russian grain exports even though grains are not sanctioned,” the second European trader said.
A Turkish grain buyer said some traders were considering rouble payments while one seller of Russian grain was willing to get paid in Turkish lira so that options was being considered.
“Times are very tough. The sales go on with problems, and we are buying. There are delays in payments, unwillingness to provide insurance,” the buyer said, adding that the cost of freight had almost doubled since mid-February.
Alexandre Boy, head grains analyst at Sigma Conseil, said the discount available for Russian wheat on an FOB (free on board) basis, which excludes freight, was large enough to cover additional shipping costs.
Traders said Russian high-quality 12.5% protein milling wheat for May shipment was this week offered at about $395 a tonne FOB, more than $40 a tonne cheaper than German and Baltic Sea region wheat and over $20 a tonne cheaper than French wheat of lower 11.5% protein content.
“When war broke out, we started to see flows decrease in the Azov Sea and you could think there would be some major effects,” he said.
“In the end, when you look at the loading lineup in the past month it’s pretty clear that there wasn’t much of a slowdown,” he added.
Late last year Russia set a wheat export quota of 8 million tonnes for the Feb. 15-June 30 period, and both Sigma Conseil’s Boy and Sovecon expect it to be filled.
“There is still a myriad of difficulties: the insurance companies are frightened, the shipowners are frightened, the clients are frightened. It is complicated, but we are doing our best,” one large exporter of Russian wheat said. (Writing by Nigel Hunt, Additional reporting by Sarah El Safty in Cairo; Editing by Veronica Brown and Paul Simao)
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