As of May 13, Russian farmers have seeded 4.1 mln ha of spring wheat. The seeding is catching up with the average pace on warmer weather after late spring which delayed the planting campaign in many regions. Despite the export tax we expect the country to increase the spring wheat area. Here’s why.
- Many farmers got great wheat margins and still like the crop. The export taxes were introduced by the government in the second half of the season and had a limited impact on ruble prices from a farmer’s perspective. They did decline but relatively modestly as it was partly offset by stronger FOB.
- Farmers are not ready to switch to other crops. If farmers really want to plant something else because of concerns about future wheat prices due to taxes for many of them it’s quite challenging because of crop rotation limitations or because they are simply not ready for this and don’t have planting seeds or other inputs. Also bear in mind that it’s not only wheat prices that are being regulated by the government. Corn, barley, sugar beet, oilseeds’ markets are also now regulated.
- Speculations that the government could lift the export taxes in 2021 are strong. Farmers do believe that the government could lift or at least ease export restrictions soon, i.e. after the Parliament election this autumn.
Our forecast of the Russian wheat crop of 81.7 MMT is based on 12.7 mln ha spring wheat area expectation. We believe that despite the export taxes farmers will still seed the area close to the previous year when it was 12.6 mln ha. USDA’s estimate of 12 mln ha looks very cautious at this stage.
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