The enormous Russian wheat stocks, which the country has not seen since the Soviet Union, ensure that the world market has more than enough raw material. Moreover, it is competitively priced, partly because wheat in the European Union (EU) can only compete on price.
At the end of the 2017/2018 marketing season, Russia has an estimated wheat stock of 20,6 million tons, writes news site Bloomberg. That is 50% more than last season. This is the highest level since the end of the Soviet Union. Exports are also at a very high level; Russia exported so far this season, 25% more wheat than any other country on the world market.
Falling prices of EU wheat, mainly from France, gave exporters hope. Although prices have fallen and those in Russia have risen, the difference is too small to convince buyers. A low rate of the ruble, in combination with enormous stocks, ensures that Russia is and remains the market leader.
Absolute market leader
The EU wheat market has had to give away 1/5 of its market share to Russia. The euro is at its highest point in 3 years against the dollar. This makes French wheat relatively expensive on the world market. The two largest buyers: Egypt and Indonesia, are failing as a result. Russia has been able to fill 2% of their government tenders.
A similar scenario is also expected for next season. Despite a late and cold spring Analysts are currently counting on a record high Russian wheat harvest. Coupled with the high end stock, this makes French export opportunities disappear like snow in the sun.
Exchange rates
Currently, Russian wheat is paying an average of $208 per tonne, the highest level in 3 years. French wheat is (delivered on board) about $4 per ton cheaper. That difference is not enough to generate more interest. A further falling rate of the ruble against the dollar is the Russians in the advantage.