Black Sea crop held back by logistics

20.10.2017

GRAIN exports continue to flow from the Former Soviet Union (FSU) nations following another big harvest in the region.

However, a combination of a logistical squeeze through key Black Sea ports and the downturn in Australian production may mean the extra stocks on the world market do not drive Australian wheat prices down significantly.

Richard Hall, senior client advisor at Market Check, said it had been another massive year for wheat production in Russia and Ukraine.

“There was a bit of dryness later, which impacted some of the later sown crops, but the wheat was very strong,” Mr Hall said.

He said grain exports in Russia were 20 per cent up compared to the same time for the previous marketing year, with wheat 12pc up.

Mr Hall said Russia, Ukraine and Kazakhstan all had strong presences in nearby export markets.

“They are big into North Africa, the Middle East and can be large exporters into India, which emerged last year as a significant buyer of Australian wheat,” he said.

The international market has been factoring in big FSU tonnages into the wheat market, keeping a lid on world wheat prices in recent months.

Compounding this from an Australian view, some within the local industry have been nervy about the potential for the emerging Black Sea exporters to undercut Australia into traditional key Aussie wheat markets in South East Asia, especially Ukraine with its devaluing currency.

Mr Hall said Australian prices would not necessarily drop as many predict.

Firstly, he said Black Sea ports were operating at capacity already.

“At this stage all the facilities are working as well as they can, you just can’t physically get any more grain out of there,” Mr Hall said.

He estimated carry-over for wheat in Russia alone would be 20 million tonnes, up from just 6mt just two years ago.

“The limit for Russian exports through their ports is around 47mt of all grain and 33mt of wheat.”

Official Russian government estimates were of a 2017 harvest of 130mt of all grains.


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