Russia’s wheat export estimate cut on weak pace, endings stocks are still the lowest since 2007/08

* Wheat exports forecast is down again
* Ending stocks are estimated at 6.6 MMT, the lowest since 2007/08

According to preliminary customs data, Russia’s wheat exports in January 2020 amounted to 1.9 MMT (-21% YoY) which is 27% lower than a month ago. The reasons are the traditional January business decline and the persistence of poor market conditions for Russian traders. Domestic prices continued to strengthen mainly in January, and the export operations margins for many traders remained close to zero or negative.

The issue of the export quota is still suspended. The government draft decree developed by the Ministry of Agriculture is under consideration by other ministries. AgMin proposes to limit the export of grains (wheat, barley, corn, oats, and rye) in January-June 2020 to 20 MMT, as, according to deputy minister Oksana Lut, “The market will not regulate itself. If one of the countries has a smaller crop, and we have a good crop, we will have everything exported, and we will have nothing to eat” (“Interfax” quote). The quota will not affect the market this season, as it will be significantly higher than expected export volumes (see below). However, the Ministry wants to make the mechanism permanent by introducing it every second half of the season. We believe that there is a chance that quota won’t be approved as Ministry of Economy could oppose it as it violates Russia’s WTO commitments.

Egypt was the main buyer of Russian wheat in January with 622 TMT, Turkey is still in second place with 468 TMT. Turkey remains #1 buyer in the season due to the record pace of purchases in the first half of the season. The country has already imported 5.2 MMT of wheat in July-January (as much as for the entire last season), and Egypt – 4.5 MMT. Against the background of the total volume reduction, Russian exports are increasingly dependent on these two countries – they got 57% of all shipments in January.

Bangladesh shipments, after a record volume of 568 TMT a month earlier, returned to more traditional volumes. The country purchased 189 TMT, remaining in third place.

In preliminary customs statistics, the information about shipments to Iran, Syria, Cuba, and Venezuela is still absent. In fact, these countries are added to the “Other” list with a monthly lag. These are shipments to Iran mainly.

We expect February wheat exports to be around 1.9 MMT, which is close to the January figures. So far, there is no signs of seasonal export increase, which was often observed earlier after January.

The total season wheat export forecast has been lowered by 0.1 million tons to 32.1 million tons (USDA 34.0 million tons) on the current weak export pace. The lowering would have been more substantial if customs had not raised estimates for December significantly.

Ending stocks are estimated at 6.6 million tons (+0.1 million tons to January revision), still the lowest since 2007/08.

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