Russian wheat export forecast cut on weak pace and low crop

Andrey Sizov 29.01.2020

According to customs data, exports of major grains (wheat, corn, barley) in December 2019 amounted to 2.7 MMT (-38% YoY), including wheat – 2.3 MMT (-39%), barley – 159 TMT (-48%), corn – 252 TMT (-25%). Since the beginning of the season (July-December), exports amounted to 24.2 MMT (-16.5% YoY), including wheat – 20.7 MMT (-16%), barley – 2.1 MMT (-31%), corn – 1.3 MMT (+8%).

In November, total exports amounted to 3.4 MMT, wheat – 2.7 MMT, barley – 343 TMT and corn – 362 TMT.

Grain exports continue to down gradually. Domestic prices have increased noteworthily, and the ruble is strengthening.

The main news of January was the AgMin’s proposal to set grain export quota in the second half of the season. The Ministry of Agriculture is developing a draft decree to set a quota for the export of key grains (wheat, barley, corn, oats, rye) in January 2020-June 2020 with a volume of 20 MMT. The quota may become permanent for the second half of the season and could be applied in later years as well.

For the current season, a quota in this volume will not have a noticeable impact on the market, since it is very likely that it will not be filled, we estimate key grain exports to be below 17 MMT in the second half of the season.

However, it is an unpleasant precedent – the size of the quota may be lower than the export potential in the future. Let us remind that in addition to the quota, Russia has a floating export tax on wheat, which is now equal to 0, but can be increased quickly if necessary.

The export forecast has been lowered again. The reason is the current weak pace and low crop figures for 2019, released by Rosstat in December.

The forecast for wheat exports was reduced by 0.9 MMT to 32.2 MMT (USDA estimate – 34.0 MMT), barley – by 0.3 MMT to 4.2 MMT (5.6 MMT), corn – by 0.1 MMT to 3.2 MMT (5.7 MMT).

The estimate of total grains exports, pulses and processed products was reduced from 42.8 MMT to 41.5 MMT.

The situation on the wheat market in the second half of the season is expected to be very tense due to low stocks. Market stocks at the end of the season are estimated at 5.3 MMT, and the stocks/consumption ratio is at a record low for the last years of 7% (7.2% a year earlier). Stocks in the corn and barley markets are expected to be at historically high levels.