The pace of wheat exports may slow down in October

October wheat exports from the Russian Federation for the first time since the beginning of the season may be lower than last year’s figure. According to pessimistic estimates, supply volumes could drop to 3.9 million tons. Kommersant’s sources note difficulties with selling wheat at prices recommended by the Ministry of Agriculture, and the regulator points to an almost doubled year-on-year increase in exports since the beginning of the season.

For the first time since the beginning of the season, wheat exports from Russia in October may be less than the value for the same period last year and the average for the month, according to the Sovecon review. Analysts estimate supply volumes for October in the range from 3.9 million to 4.4 million tons, compared to 4.5 million tons a year earlier and the monthly average of 4.1 million tons. Sovecon estimated September wheat exports at 5 million tons, August at 5.3 million tons, and July at 4.4 million tons.

The volume of contracts concluded for the sale of Russian wheat on October 2–5 decreased week by week by 1.4 million tons, to 2.6 million tons, which was the minimum value since July 2023, Sovecon indicates. Rusagrotrans, whose reports are provided by the industry portal Pole.RF, forecasts wheat exports in October at 4.5 million tons. The general director of the Institute for Agricultural Market Studies, Dmitry Rylko, gives the same assessment.

Kommersant’s interlocutor among exporters associates the slowdown in exports with the need to follow the prices recommended by the Ministry of Agriculture. The newspaper Vedomosti reported about such recommendations in the summer. “It’s impossible to sell,” says Kommersant’s source. According to him, there is demand for wheat today at $225 per ton, but not at $230–235 per ton. At the latest tenders of the Egyptian state-owned company GASC, wheat from the Russian Federation was offered only at $270 per ton. Sovecon also associates the expected decline in exports with reports of attempts by the Russian authorities to limit sales at current prices.

Sovecon director Andrei Sizov also notes increased competition from Romania and Poland, which are actively exporting wheat and have accumulated large reserves. And Dmitry Rylko adds that key importers, such as Turkey and Egypt, still have sufficient stocks. Turkey, Mr. Rylko believes, is unlikely to be active in the market until the end of 2023.

As noted in the Sovecon review, demand for grain from exporters remains low.

The purchasing price index of the Union of Grain Exporters in deep-sea ports for October 2–6 increased from 14.24 thousand to 14.78 thousand rubles. per ton, in shallow water – remained at the level of 11.61 thousand rubles. per ton. Average selling prices for wheat of the third and fourth classes in the center of Russia over the week decreased by 200–225 rubles, to 12.87–11.67 thousand rubles, according to Sovecon.

Chairman of the Board of the Union of Grain Exporters Eduard Zernin says that last season stock prices were moving upward, but now the pressure is going in the opposite direction. The price indicator created on the foreign exchange market is completely divorced from real life, he points out. According to Mr. Zernin, it is more profitable for Russian exporters to wait it out than to sell at a loss to themselves and the farmers. And in Egypt, he continues, despite the decrease in purchases from GASC, the demand of private companies has intensified. “We are well ahead of schedule, the infrastructure is working to the limit,” adds Eduard Zernin.

There are prerequisites for reviving demand for Russian wheat, says Andrei Sizov. Egypt still has a need for grain, and at recent tenders the country purchased small volumes, which in the future could lead to deferred demand, he points out. In addition, the expert adds, world wheat prices have probably already reached the bottom and growth may resume. But it will not be possible to compensate for the lost monthly volumes due to the limited capacity of the infrastructure, he emphasizes.

The Ministry of Agriculture told Kommersant that since the beginning of the season on October 5, according to customs data excluding the EAEU, 18.2 million tons of grain crops have been exported, which is almost twice as much as a year earlier. Over the last week alone, over 1.8 million tons were exported, and a total of 28 million tons of grain were contracted for the second half of 2023, they added.

Anatoly Kostyrev