Russia’s domestic wheat market is rising fast, supported by demand from exporters and domestic buyers as well as worsening crop outlook. This could negatively affect wheat exports pace during the next few months from the top world wheat exporter.
Last week, SovEcon price index for 4th grade food wheat (12-12.5% prot.) rose 550 rub to 13,375 rub/mt (USDRUB = 73.3). Prices were going up rapidly all over the country, driven by strong demand from exporters and domestic buyers.
Many sellers default on existing contracts leading to more panic buying. It looks like some domestic processors after the introduction of the export tax were not prepared for such prices at the start of the season. 4th grade is the major export grade.
Estimates of the new wheat crop were cut sharply in recent weeks after Rosstat released unexpectedly low winter wheat area number. Disappointing yields in the Center and the Volga Valley also contributed to lower crop estimates. SovEcon cut Russian wheat crop estimate from 82.3 mmt to 76.4 mmt. USDA’s July estimate was 85 mmt (ex. Crimea with 0.7-0.8 mmt) and probably will be cut substantially this week in the new WASDE report.
Rising ruble prices, strong ruble, competition with other origins and unpredictable weekly-adjusted “floating” wheat export tax could mean sluggish exports during next few months. In August exports are tentatively estimated at 4-4.5 mmt compared to 4.7 mmt on average for the month.
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