Global wheat offers have been on a slippery slide during the past month as confidence grows about new crop Northern Hemisphere production.
This is especially the case in the Black Sea region, where early season concerns about dryness and late planting have been placated by favourable winter and early spring conditions.
The results of last week's tender by Egypt's General Authority for Supply Commodities (GASC) confirmed the much lower new crop price regime.
It also asserted the Black Sea region's eagerness to get back in the game following the export tax confusion that has dominated market talk - and action - in recent months.
The market was quite surprised that Egypt issued a tender so close to its own harvest, which is expected to start this week.
The shipment period was also a surprise, as GASC rarely tenders as far out the curve as it did last week.
Speculation suggests this demonstrates confidence about domestic production, with the government hoping to procure 3.5-4 million tonnes from local growers this season.
When the tender closed last Tuesday, GASC had received about 1.25 million tonnes of offers.
There were 400,000 tonnes of Russian wheat tendered, with all prices falling within a one-dollar range.
No French wheat was furnished, but the cheapest offers from Russia, Ukraine and Romania were all within US$1.65 of each other - underlining the competitive nature of the new crop Black Sea market.
The lowest price was Russian origin at US$234 per tonne free on board (FOB), which is about US$230/t FOB after additional GASC costs are taken into account.
Nominally, this equates to about US$209/t after the export tax is applied.
The variable rate tax is currently set at 70 per cent of export price above US$200/t FOB.
Who knows what it will be by the time the grain is actually shipped, such is the uncertainty around the Russian government's market intervention.
GASC ended up buying six cargoes totaling 345,000 tonnes for August 1-10 shipment, of which five were Russian origin and one will be shipped out of Ukraine.
The prices ranged from US$251/t to US$252.75/t, including cost and freight (C&F), and the average price came in at US$252.09/t.
This was US$45.31/t cheaper than the average price paid for six Romanian cargoes in their last tender back on March 11 for April 15-25 shipment.
The old crop/new crop market inverse for wheat out of the Black Sea has been evident for some time and, when production concerns eased, new crop prices were always going to decline.
But this is still one of the biggest downward moves GASC has witnessed between tenders for many years.
It highlights the eagerness of Russian exporters to get some new crop sales on their books, despite the export tax burden and uncertainty.
The Russian Federal State Statistics Service (ROSSTAT), released its final 2020-21 production numbers last week, calling the national wheat crop a record 85.9 million tonnes.
Debate now revolves around the volume of exports, with the US Department of Agriculture (USDA) raising its estimate by 0.5 million tonnes to 39.5 million tonnes in last week's World Agricultural Supply and Demand Estimates (WASDE) report.
Leading agricultural consultancy SovEcon currently has exports pegged at 38.9 million tonnes.
But both are at the high end of estimates, with some in the trade as low as 35 million tonnes.
Either way, 2020-21 carry out stocks will increase compared to the previous season, with the USDA forecasting a 67 per cent increase to 12 million tonnes - and others as high as 17 million tonnes.
This will obviously add to new crop supplies and potentially increase Russia's exportable surplus if the production outlook remains favourable through to harvest.
On the new crop front, SovEcon added 1.4 million tonnes to its Russian production forecast last week due to vastly improved crop conditions in the country's south.
The updated estimate of 80.7 million tonnes would be the third-biggest crop on record.
But it does come with a caveat around production concerns in Russia's central regions, where crop health is mixed.
Favourable early spring weather and an optimistic forecast for the balance of April has consolidated Ukraine's new crop wheat production estimate at 26.7 million tonnes.
This is smack on the average of the last six years.
Even in the driest cropping districts, soil moisture levels are at or above the long-term average.
This augurs well for crop development as the spring temperatures begin to rise in the second half of April.
The big sleeper in this whole Black Sea wheat supply equation are the rising tensions between Russia and Ukraine.
These have been simmering since the illegal annexation of the Crimean Peninsula in 2014, but there have been several deadly clashes in recent weeks leading to a build-up of troops and tanks on the Russian side of the border.
As Ukraine is geographically divided between Europe and Russia, so too are the people divided - pro-Russian and pro-western.
Pro-Russian separatists also claim control over eastern Ukraine, including the Donbas region, which they have illegally controlled for the past seven years.
It is not the impact on production that is a concern, but the potential disruption to trade flows out of the Black Sea region if the conflict escalates.
The building expectation of a bumper harvest in the Black Sea region is weighing on Australian export prices.
Russia is the world's biggest exporter of wheat and the global export price setter.
Australia enjoys a substantial freight advantage into South East Asia, but the substantially lower new crop Russian price means Australian export offers have had to adjust lower to compete with the aggressive Black Sea offers.
After enjoying prices in excess of US$300/t (C&F), Indonesia earlier in the marketing campaign for Australian Premium White (APW) wheat prices are quoted in the US$280/t to US$285/t (C&F) range for nearby business.
But exporters have to compete with new crop Black Sea offers of US$270/t to US$272/t (C&F) into Indonesia for July-August shipment.
With soil moisture conditions ideal for planting in Western Australia, New South Wales and Queensland, there is already potential for another big Australian crop.
This will increase pressure to clear the exportable surplus from last year's record crop - necessitating competitiveness against new crop Black Sea exports in the second half of the year.
