The balance between market demand and supply determine the price of any commodity. A higher demand amid disruptions in supply chain, drive up prices of the commodity; while a lower demand amid unhindered supply leads to drop in prices of the commodity and as it seems, the latter is the case with respect to prices of Russian wheat, post extension of Black Sea Grain deal.

Prices of Russian wheat dropped last week as the global wheat market felt a bit relieved after the extension of Black Sea Grain deal by another 60 days. Expectations of a reduction in export duty is also playing a crucial role in bringing down prices according to experts and analysts familiar with the subject matter.

Extension Of Black Sea Grain Deal

The Black Sea Grain Deal which was brokered by the United Nations and Turkey last July for safe passage of grains from Russia and Ukraine was set to expire on 18th of May, 2023. However, Russia agreed to extend it for another 60 days to relieve parts of the world, struggling with hunger and food insecurity and this drove down prices of Russian wheat in the global market. 

Post the extension of Black Sea Grain Deal, prices of Russian wheat with 12.5% protein, delivered free on board (FOB) basis from the Black Sea region in June stood at $242 per tonne, down $6 from the previous week, the IKAR Agriculture Consultancy said in a statement.

Mr. Dmitry Rylko, head of IKAR Agriculture Consultancy said that the market is still waiting for a decision on export duty cut. They are anticipating a clear and exact formula for calculation of the same. 

Russia’s Wheat Exports 

A look at the data reveal that Russia exported 3.8 million tonnes of wheat so far in the month of May, up 2.6 million tonnes as compared to Russia’s wheat exports during the same month last year. 

Of this, 1.21 million tonnes of grain have been exported by Russia last week itself. The weather conditions also remain favorable for new wheat harvest and it unhindered supply of Russian wheat can be expected in weeks and months to come.

The Bottom Line

Russia is one the top 10 wheat exporters of the world and extension of Black Sea Grain deal, followed by favorable weather conditions and expectation of reduction in export duty has brought down export prices of Russian wheat last week.

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