Russia's wheat sale to Bangladesh may weigh on global prices

Global wheat prices may come under slight pressure over the next few days from Russia's successful wheat export deal with Bangladesh, ample supply, and spill over impact from the Goldman Sachs controversy.

 

Bangladesh has approved a 300,000-tonne direct purchase of wheat at US$219/tonne on a cost, insurance and freight basis from Russia's United Grain Company for delivery over the next three months to the ports of Mongla and Chittagong.

 

Traders said the deal may involve a single purchase of 300,000 tonnes but it is a pointer of things to come. They said its importance lies in the breakthrough that has been made, as in the future, Bangladesh, one of the world's largest wheat importers, may increase its dependence on Russian wheat.

 

"The deal was in the pipeline for the last few months and doesn't come as a surprise but it may have a psychological impact on wheat prices because of its future implications," an analyst in Singapore said.

 

Russia's ability to enter new markets including Southeast Asia, South Asia and Latin America is one of reasons for high inventories of wheat in the US, which is putting downward pressure on prices, he said.

 

The May wheat futures contract on the Chicago Board of Trade settled Friday (Apr 16) up 10 1/4 cents, or 2.1%, at US$4.90 1/2 a bushel. "Prices rose due to technical reasons and may fall towards US$4.50/bushel again soon," a Tokyo-based executive at a global trading company said.

 

The Bangladeshi government traditionally buys wheat through tenders and the latest direct purchase from Russia ensures that it will not have to issue any more tenders for the rest of the financial year that ends on June 30.

 

Traders said there is an ample volume of wheat available with an increasing number of countries expressing interest in exporting the grain.

 

Pakistan is already working on procedural details to export two million tonnes of wheat. In May, Iran plans to resume exports of wheat after three years and aims to sell around two million tonnes to Oman, Egypt and the United Arab Emirates.

 

Even though there has been a shift in acreage to corn and soy from wheat in the US, overall supplies are comfortable, said Genichiro Higaki, head of the proprietary fund management team at Sumitomo Corp. in Japan.

 

Markets for commodities including grains are still trying to digest the news of US regulators' investigation into charges of fraud at Goldman Sachs, he said.

 

The impact of the Goldman probe on commodities markets may be temporary, but currently there is a lot of selling pressure, he said.