Column by Anatoly Kostyrev on the role of the Russian Federation in the world wheat market

Wheat deliveries from Russia in the new grain season that began on July 1, apparently, will be in the center of attention of the world market. While the Ministry of Foreign Affairs of the Russian Federation declares about the lack of progress in the implementation of the grain deal in terms of Russian exports of food and fertilizers, competitors in the global market are sounding the alarm.

Wheat exporters from the EU recently told Reuters of their concern about the supply of grain from the Russian Federation, the cost of which is still $ 25-30 lower than the European one. The export index of Russian wheat in June fell by 2.5% compared to May, to $ 234 per ton, calculated at the Center for Price Indices of Gazprombank. “We’re in no man’s land for now,” one French wheat trader told Reuters about the demand outlook for the new season. And Bloomberg made an even louder statement, announcing Russia’s “tightening” control over the world’s wheat supplies for political support and currency.

The concern of European grain suppliers is understandable. The harvest this season in the EU is expected to be larger than last year, and grain supplies from Ukraine are increasing supply, which is already complicating grain storage in some countries. “This year, farmers will not have free space for part of the harvest,” RIA Novosti quoted Vladimir Pikha, a representative of the Union of Czech Agrarians, as saying.

Exporters of Russian wheat, apparently, should not wait for trade relief in the current conditions, which became more complicated after the outbreak of hostilities in Ukraine. Moreover, the public concern of European traders due to the growth of Russia’s share in the world market may signal possible new obstacles to payments, insurance and freight.

“European exporters are actively using interstate lending to finance grain buyers. At the beginning of last season, we were practically outside observers at the tenders of GASC (Egyptian state-owned company.— “b”). I won’t be surprised if a similar situation repeats this year,” said Eduard Zernin, Chairman of the Board of the Union of Grain Exporters. Although direct restrictions on food from the Russian Federation, according to my interlocutors, are unlikely.

For grain buyers, the situation may turn out to be very successful, but there are fewer reasons for optimism among Russian farmers. Wheat prices in Russia, analysts at Gazprombank say, have risen, but remain below March levels. The gap with last year’s levels of 16 thousand rubles. per ton already reaches 4-5 thousand rubles. On the other hand, low prices are a good competitive advantage, and Russian grain exporters have so far managed to cope with “hidden barriers”.