For the second year running, Russia is the world’s top wheat producer with exports of 22.5 million tonnes of grain this year, according to the US Department of Agriculture. Russia won contracts to exports 120,000 tonnes of wheat to Egypt. The Agriculture Ministry stated that in the autumn, as soon as the harvest brings in a new crop, Russia would supply wheat to China. Russia’s leading position in the global wheat market is because of its low-price strategy, which increased its market share.
The weakened national currency and favourable weather, as well as more investment, pushed forward Russian agriculture and unseated the USA as the world’s biggest wheat exporter. The Black Sea region, including the Ukraine and Romania, traditionally takes the lead at the start of the season with French exports catching up later. However, this year, France is out of the league of top wheat sellers after heavy flooding waterlogged fields and increased concerns over grain quality. According to German agriculture consultant BayWa, the soggy fields reduced crops by 17 percent (to 34 million tonnes) this season.
Matt Ammermann, a commodity risk manager at US-based financial services firm FCStone told Bloomberg, “The Black Sea just has so much to sell now and the quality is coming out better than expected. Traders aren’t even willing to look at French wheat after the harvest delays”. As of Friday, the Moscow-based Institute for Agricultural Market Studies said that wheat at Black Sea ports sold for 165 USD (10,550 Roubles. 1,100 Renminbi. 11,100 INR. 215 CAD. 220 AUD. 150 Euros. 125 UK Pounds)/tonne according to. That’s at least 15 USD (960 Roubles. 100 Renminbi. 1,000 INR. 19.50 CAD. 20 AUD. 13.60 Euros. 11.35 UK Pounds) cheaper than French wheat. Kiev-based UkrAgroConsult believed that Russia should gain nearly 16 percent of the global market this year compared to 14.4 percent a year ago. France’s share would reportedly decline to 11 percent from 12.1 percent last season. Sergei Feofilov, the head of UkrAgroConsult, told Bloomberg, “Russia’s position in the wheat market is changing because Russian farmers received high margins from selling their grain crop of last year, which they used to invest in better farming and technology”. Experts are positive on Russian wheat production through 2020, citing the weak rouble over the period. Alexandre Andrey, an analyst at BMI Research, told Bloomberg, “Thus, Russia would be in a prime position to compete on volume and price against France, Romania, and the Ukraine”.
20 July 2016