Ruble Drives Russia Wheat to 5-Month High as New Crop Capped

May 17, 2016 03:45 PM

Russian wheat prices rose to a five-month high on a stronger ruble and as supplies near the Black Sea region dwindle.

Wheat for loading at ports in the Black Sea climbed to $193.50 a metric ton last week, the highest since Dec. 4, according to Dmitry Rylko, a director at the Institute for Agricultural Market Studies, or Ikar. Ruble gains make sales of wheat in dollars less attractive.

The ruble advanced 0.5 percent against the dollar last week and is up 12 percent this year after a rebound in oil, the backbone of Russia’s economy. The currency is the best performer among 24 emerging markets tracked by Bloomberg. Wheat prices are also advancing as supplies are limited, especially in the south, according to Ikar.

The gain is "in connection with a shortage of wheat," Rylko said by phone from Moscow. "The ruble is strengthening and demand is high."

Wheat with 12.5 percent protein content rose from $190.50 a week earlier, Ikar data showed. Prices for the new crop are lower, with Veles-Agro pegging wheat from the season starting in July was at $176 to $177 a ton, the Odessa, Ukraine-based broker said in a report e-mailed Sunday.

New Crop

Grain from the new crop is trading at a lower price as Ikar estimates farmers will gather 62.5 million tons of wheat next season, the most in eight years. Favorable weather is pushing crop forecasts higher, with expectations for Russian output now slightly above 63 million to 64 million tons, Matt Ammermann, a commodity risk manager at INTL FCStone Inc., said in a report Tuesday.

Ruble gains make Russian wheat less competitive in export markets. Ukrainian grain with 12.5 percent protein content was at $188.50 a ton on Friday, data from UkrAgroConsult showed. In France, wheat with a minimum 11 percent protein content for loading at the port of Rouen was at $176.36 a ton, according to crops office FranceAgriMer.

French wheat exports will probably come to 19.37 million tons, about 4 percent more than estimated in April and near the record 19.41 million tons shipped the prior season, FranceAgriMer said last week. Exporters are benefiting from increasing demand from Morocco, where severe drought cut the harvest by 70 percent, as well as prices that are competitive against major exporters including the U.S. and Russia.

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