Slower Russian wheat exports to benefit the US

MOSCOW, Russia — In 2017/18, Russia exported a record-high 1.5 billion bushels (41 MMT) of wheat and became the largest world wheat exporter taking the market from the U.S. and the EU.

However, since that time, export volumes have been declining. This trend is likely to remain in place in 2019/20 when the country is expected to ship abroad 1.18 billion bushels (32 MMT).

In the July-September 2019/20 marketing year, Russia has shipped 440 million bushels (11.8 MMT) of wheat which is -10% YoY. The domestic supply is tight. Many farmers prefer to store wheat for as long as they can, while selling other crops, like barley or sunflowers, when they need cash to repay loans or finance the winter seeding campaign. This is a common scenario, however, this season a farmer has more cash in his pocket after the 2018/19 season with relatively high prices. This is especially true for major export regions, like central or southern Russia. The South is important because it’s a key growing region that has almost all sea export grain terminals.

Low carry-in stocks are also not supporting exports. We estimate them at 290 million bushels (7.9 MMT), which is two times lower than in 2018/19.

As a result, domestic prices remain relatively high and exporters’ margins are razor-thin or negative in many cases.

Currently, the domestic wheat market is going down. This will support exports in forthcoming months but the overall effect will be limited as prices in many regions are still above the export parity.

In the second half of the season, we believe that domestic prices are likely to remain relatively high due to projected low carry-out stocks. We estimate them at 0.25 billion bushels (6.8 MMT). Stocks-to-use is projected at 9%, which is the lowest value for more than 10 years.

Overall exports in the current season are estimated at 1.18 billion bushels (32 MMT) (-10% YoY). Russia’s share could be partly taken by Ukraine, the EU, and the U.S. Currently, USDA estimates Russian exports at 1.25 billion bushels (34 MMT). We believe this is a bit optimistic and should be lowered later during the season while figures for the U.S. could be upped.

With lower exportable surplus, Russia is likely to focus more on its traditional markets, like the Middle East and Northen African countries. Supplies to more distant markets, like Mexico, the Philippines, or Nigeria, could suffer, which also could be beneficial for U.S. wheat exports.

The piece has been originally written for Agriculture.com

Follow the Black Sea grain market

Get your free trial of The Sizov Report — an analytical service covering agricultural markets of Russia, Ukraine and Kazakhstan

Try for free

More Articles for You

Ukraine’s bumper corn crop to pressure U.S. exports business

Ukraine is expected to harvest a record-high corn crop this year which threatens the US exports to Asia

Russian wheat FOB prices are down following global benchmarks

12.5% wheat prices continue to creep lower, last week they were down $1 again to $193 (FOB deep sea) on …

Russia’s wheat exports declined 14% in 18/19, further decrease is expected in 2019/20

In the 2018/19 (July-June) season Russia exported 35.3 MMT of wheat which is 14% lower than a year ago. In …

USA lost Chinese corn market even before the trade war thanks to Ukraine, fast-growing Black Sea exporter

USA lost Chinese corn market years ago to Ukraine, which exports rose six times in last 10 years. This year the country is expected to harvest another bumper corn crop.

Russian wheat traders face a tough start to the season

Russia’s traders face a tough start of the new export season. Farmers remain slow sellers, the ruble is strong and new crop outlook is deteriorating. July wheat exports are projected at 3.1 MMT, -18% YoY.

Russian wheat crop slashed to 73.7 MMT

SovEcon cut Russian wheat crop estimate from 76.6 MMT to 73.7 MMT after assessing the situation in Center and Volga Valley. The dry weather which we observed in May-June had a significant negative effect on crops in almost all key winter wheat regions.