MOSCOW: Large stocks should help Russian wheat exports climb to a record level in the 2017/18 marketing year despite a drop in production in the region which should lead to a decline in shipments from Ukraine, a Reuters poll showed. Overall exports from Russia, Ukraine and Kazakhstan are forecast to fall 3.3 percent to 50.4 million tonnes in the upcoming season which starts on July 1, the poll of 16 analysts, officials and traders showed. The bulk of the wheat is exported via the Black Sea to customers in North Africa and the Middle East. The combined crop of Russia, Ukraine and Kazakhstan is expected to decline by 7.5 percent year-on-year to 105.8 million tonnes of wheat in 2017.
Russia is seen on track to set a new record for its wheat exports in 2017/18 despite the lower crop thanks to historically high stockpiles and competitive prices. “Russia is $10 to $15 cheaper than European origins for delivery during summer. This is usual due to their need to export every year at the beginning of season,” Michel Portier, French agricultural consultancy Agritel chief executive, said. “This element will be even more important this year due to the huge beginning stock which we estimate at 11 million tonnes of wheat compared to 5.6 million tonnes last year,” Portier added.
The poll gave a 2017/18 wheat export forecast for Russia of 28.8 million tonnes, up 4.7 percent year-on-year, with the crop expected to fall 6.2 percent to 68.0 million tonnes. In the current year, the U.S. Department of Agriculture (USDA) sees Russia’s wheat exports at 27.5 million tonnes. For Ukraine, the focus will be on its crop quality as exports are expected to decline but still large. The poll suggests Ukraine’s 2017/18 exports will fall to 14.6 million tonnes from the USDA’s 17.8-million-tonne estimate for this year, while the 2017 crop is forecast at 24.5 million tonnes, down 8.6 percent year-on-year.
Kazakhstan, central Asia’s largest grain producer, is expected to export 7.0 million tonnes of wheat, including flour, up 2.9 percent year-on-year, with a 11.3-percent fall in the crop to 13.3 million tonnes. No big changes are expected for Kazakhstan it terms of trade but the country may raise sales to Iran, a German trader said. Forecasts for Russia and Ukraine exclude about 750,000 tonnes of wheat which, according to an average estimate, the Crimean peninsula is expected to produce and about 500,000 tonnes of its estimated exports. Crimea exports some grain but its supplies are complicated by legal risks due to the annexation by Moscow in 2014.
Among the risks for the poll are uncertainty over Russia’s rouble rate against the dollar as the rouble is 15 percent stronger now than around the same date a year ago but is still far from its level in mid-2014 when it began falling. “Due to the strong rouble farmers try to avoid selling. That’s the main reason for the huge beginning stock,” Portier said. Traders also said logistical challenges and Russia’s new domestic rules on strict value-added tax accounting brought additional risks and may affect domestic purchases, but no export restrictions are expected in the new season. The geopolitical situation will also be a factor with the focus on Russia’s relationship with Turkey over the Syria crisis and Kiev’s relations with Moscow. While supplies to Egypt, the world’s largest wheat importer, remain uncertain for all traders due to the recent issue surrounding the ergot fungus, Russia may strengthen its position in North Africa, where it has managed to increase market share after weak French exports this year, said Gabriel Omnes, an analyst at consultancy Strategie Grains.
