SovEcon: Russian wheat exports in July-August decreased 27% year-on-year, the lowest volume since 2017/18

According to estimates by SovEcon, a leading Black Sea agricultural markets research firm, Russian wheat exports in July and August, the first two months of the 2022/23 season, was 5.9 mmt, down 27% year-on-year and the lowest volume since the 2017/18 season. 

Exports remained sluggish as Russian wheat FOB prices have remained high compared to other suppliers, most notably the EU. The Russian-French wheat spread has been positive recently while it should be negative, down $7-$15/mt, in order to boost exports during the peak time of the season, which is August to November.

Exporters may face issues later in the season, due to worsening weather conditions in the Black Sea winter and a seasonal postponement of river navigation. Additionally, in February 2023, Russia is expected to introduce an export quota, which could limit export flows.

Elevated FOB Russian prices reflect the problems facing Russian exporters. The rouble is strong and export tax is still high, currently accounting for around $80/mt. As a result, farmers have remained reluctant to sell. The current domestic prices of average milling wheat (12-12.5% prot.) are 12,025 rub/mt ($201/mt), down 5% year-on-year, while farmers’ costs per ha rose by 20% to 25% year-on-year. The nearest CBOT wheat contract rose 10% year-on-year.

Russia aims to produce a record-high crop this year, which is estimated at 94.7 mmt by SovEcon. In August, the USDA upped the level of Russian wheat crop by 6.5 MMT to 88.0 MMT excluding Crimea, which is expected to produce around 1.3 MMT, according to SovEcon.

Andrey Sizov (Head of SovEcon) said, ″Russian wheat exports could accelerate near-term, due to falling domestic market values and/or higher global wheat prices. We believe that the Russian domestic market is far from having reached the bottom level while there is a good chance that the global market has passed it already. Slow Russian exports at the start of the new export campaign has been one of the key bullish factors so far.″

About SovEcon

SovEcon is a leading Black Sea corn and wheat market consultancy company providing consistent data and accurate analysis of the region, as well as helping funds, traders and buyers to trade better and manage their risks. You can get your free trial of their flagship service, The Sizov Report, at sizov.report.