We have cut 2021/22 Russian wheat exports estimate by 0.3 mmt to 34.0 mmt. Total grain and pulses exports are estimated at 43.8 mmt (-0.6 mmt). The revision reflects smaller crop expectations and the current sluggish export pace.
Earlier we cut the Russian wheat crop forecast by 0.1 mmt to 75.5 mmt and the total grain crop forecast by 0.7 mmt to 119.4 mmt. The major reasons were lower yields and higher area abandonment in the Volga Valley region.
In late October, Russian AgMin cut its total grain forecast from 127.4 mmt to “above 123 mmt”.
USDA estimates news Russian wheat crop at 72.5 mmt (ex.Crimea which will produce around 0.9 mmt of wheat as per SovEcon’s estimate) and 2021/22 exports at 35 mmt.
Russia started 2021/22 wheat export campaign at an average pace. However, in October exports began to slow down fast. SovEcon estimates that October exports were only 3.2 mmt (-30% YOY), the lowest volume in five years. July-October 2021 exports are estimated at 15.6 mmt (-7% YOY).
Exports are hampered by a tight S&D balance and hardly predictable wheat export tax. The competition with Ukraine which has harvested a record wheat crop and the EU remains elevated.
In the second half of the season, Russia’s wheat will face additional competition thanks to another good crop in the Southern hemisphere. Australia is on its way to another bumper crop (USDA est: 31.5 mmt vs 33 mmt in 2020/21 and 14.5 mmt in 2019/20)
However, near-term Russia’s wheat exports will be supported by the fact that it has regained its competitive edge after a rapid rally in the EU wheat. December Black Sea – Matif spread has fallen from $24/mt in August-September to $9/mt in November. An additional factor is a gradual weakening of the ruble vs US dollar amid relatively flat domestic ruble prices.
Forthcoming grain and wheat export quotas are expected to be relatively non-restrictive by SovEcon.
Potentially we could cut export estimate further in the next revisions, however, 30-31 mmt of exports the market is chatting about seems extremely low at this stage.
Wonder what USDA will say tomorrow. On one hand, they will have to up the production as their number has been already surpassed and the harvest is not over, on another – their export number is very optimistic compared to the current pace.
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