High wheat prices, disappointing yields and a hefty export tax. These are factors that ensure that Russia has to let go of the wheat market at the beginning of this season. Ukraine – which is reaping a record crop – is eager to fill the gap. Europe is also doing good business.
Russian wheat prices are currently at a stable high level. Coupled with the export tax that must be paid on every ton of wheat, wheat from this country is no longer as competitive as before. In the first phase of the export season, Russia normally exports the most tons. This season that could turn out differently.
9% less exports
The influential market agency SovEcon has lowered its wheat yield forecast from 82,3 to 76,4 million tons and currently to 76,2 million tons. This has to do with a smaller area of winter wheat and disappointing yields of spring wheat in eastern Russia. Wheat exports of 4,3 million tons are estimated for August. That is 9% less than last year.
Ukraine is the only country on the European continent that has a good grain harvest this year. It is now benefiting considerably from this. According to the latest figures from the agriculture ministry, the country will harvest 80,6 million tons of grains this year, compared to 68 million tons last year. Drought then severely affected production, which was still 2019 million tons in 75. Of this total, 32 million tons is wheat. The ministry expects an export of 23,8 million tons.
European countries such as Romania also see their opportunity and are doing good business at the moment. Despite disappointing quality, the EU still has a significantly larger wheat harvest to harvest than in the past 3 years. It is also competitive in the export market at this price level. Australia can become a competitor for the phase after January 1 because the country is heading for a good harvest.
Export tax makes the market cautious
What is also not helping Russia is the much-discussed export tax. This is substantial and it ensures that grain traders only do business in the short term. At the same time, arable farmers are reluctant to sell their wheat. They are afraid of doing business too early and that prices could rise further. In the meantime, winter wheat is already being sown in the gigantic country. Due to drought, the sowing rate is lower than last year.
The effect of this tax – which is aimed at halting price increases – is clearly visible in exports. The Egyptian GASC tender of August 30 shows that Russian wheat is not keeping pace with wheat from France, Romania and Ukraine in terms of price levels. Compared to the previous tender, prices have increased by an average of $9 per tonne. Countries such as Egypt, Morocco, Turkey, Algeria and Syria are not stopped by the current price level and sky-high transport costs. These now amount to between $30 and $35 per ton of wheat.
Wheat price recovery
On Monday, August 30, the wheat price in Paris rose again after some recovery had already been made the previous Friday. The December contract also traded higher. The last 5% of wheat in France and Germany has yet to be harvested and yields are lower than expected at the beginning of this month. In the United Kingdom, barely 40% of all wheat has yet to be harvested.