Russia opens bins – Newspaper Kommersant No. 68 (7513) of 04/19/2023

A good harvest and huge ending stocks make it possible to build optimistic plans for the export of wheat from Russia in the coming season. According to analysts, the country can export 37.5-45 million tons, which will be comparable to record shipments this season. Restrictions on the import of Ukrainian grain from Eastern European countries can support wheat prices on the world market.

Russia can export 43 million tons of wheat in the 2023-2024 season, which will be the second result after the current season’s record, Sovecon expects. Andrey Sizov, the director of Sovecon, says that the actual export of wheat in the next season may turn out to be higher than 43 million tons, compared with the result of the 2022-2023 season. This season, Sovecon estimates wheat exports from Russia at 44.5 million tons, and total grain at 55.9 million tons.

According to Andrey Sizov, despite the expected crop decline in 2023, the wheat harvest is expected to be above average, and given the huge carryover stocks, the total supply will decrease only slightly year-on-year.

Due to favorable weather in key regions, Sovecon on April 18 raised the forecast for the wheat harvest in Russia in 2023 by 1.5 million tons, to 86.8 million tons. This is 17% less than the 2022 level of 104.2 million tons, as well as 5% more than the average over the past five years of 82.5 million tons, analysts write.

According to Rosstat, wheat stocks in agricultural organizations as of March 1 reached 17.4 million tons, which is 82% higher than the average for five years.

Director of Prozerno Vladimir Petrichenko still forecasts the export of wheat from Russia in the next season at the level of 42 million tons. The analytical center of Rusagrotrans estimates shipments at 37.5 million tons, taking into account continued purchases for the intervention fund. If purchases are adjusted, then exports may reach 40 million tons, Rusagrotrans analysts point out.

Deputy Prime Minister Victoria Abramchenko said at the end of March that the government was considering increasing grain purchases for the intervention fund by 7 million tons. The Institute for Agricultural Market Studies (IKAR) predicts the export of Russian wheat in the 2023-2024 season at 45 million tons against the expected result for this season of 46 million tons, says IKAR CEO Dmitry Rylko.

According to IKAR cited by Reuters, last week the average prices for Russian wheat with 12.5 percent protein fell by $2, to $271 per ton (FOB).

Sovecon estimates the average price of wheat from the Russian Federation at $277-283 per ton.

According to Rusagrotrans, published on the Pole.rf portal, Russian wheat of this class for delivery in May-June is sold at $275 per ton, but buyers offer less than $270 per ton (FOB).

At the same time, at the beginning of the week, wheat quotes on world exchanges supported the news about the introduction of a ban on the import of Ukrainian grain from Poland, Hungary and Slovakia, where this was explained by the need to support local agricultural producers. As Reuters reported, Romania could also introduce such restrictions. Bulgaria is also considering a temporary ban, the local Ministry of Agriculture said. According to Prozerno, on April 17, wheat futures on the Chicago stock exchange went up by $5.1 to $255.8 per ton. The European Commission considers unilateral trade restrictions of EU members unacceptable. On the evening of April 18, it became known that Poland agreed to unblock the transit of Ukrainian grain through its territory.

According to a Kommersant source in the market, Ukraine exports about 60% of grain through European countries, the rest is exported as part of a grain deal from ports on the Black Sea.

The Ukrainian Grain Association estimates the export of grain and oilseeds in March 2023 at 6.4 million tons, in February – at 5.5 million tons. According to Vladimir Petrichenko, if restrictions on the supply of Ukrainian grain by some European countries continue, this will prevent dumping on the EU market and lead to further movement of quotations, which will be positive for all suppliers.

As Dmitry Rylko notes, if the transit of Ukrainian grain through European countries continues, the impact on the world market will be minimal. Andrei Sizov believes that the restrictions should cause a further reaction from Brussels and should not be expected to have any impact on world prices and Russian exports. The interlocutor of Kommersant on the market adds that problems with the export of Ukrainian grain through the EU increase the significance of the grain deal. The Russian Foreign Ministry previously noted that without solving systemic problems (connecting Rosselkhozbank to SWIFT, resuming supplies of agricultural machinery and spare parts, lifting restrictions on insurance), “there is no need to talk about extending the deal after May 18.”

Anatoly Kostyrev