Heavy carry-over stocks will support Black Sea wheat exports


The slower-than-expected pace of Black Sea wheat exports so far this season will result in ample supplies and strong exports next season, despite falling production, US officials said.

Local US Department of Agriculture bureaus in Russia and Ukraine trimmed their ideas of exports in this season for both countries.

But Russian wheat exports will hit new record highs next season, with Ukrainian exports also remaining resilient, as traders continue push heavy old-crop stocks out the door, the officials said.

Heavy carry-over stocks

The USDA's bureau in Moscow forecast Russian wheat exports at 28.0m tonnes in 2017-18, up 1.5m tonnes year-on-year, although missing a forecast by the International Grain Council by 2.2m tonnes.

This increase comes despite an expected despite a drop in production, thanks to the large inventories built up from last summers' bumper harvest.

Russian wheat production is expected to fall by 6.5m tonnes, to 66.0m tonnes, 1.0m tonnes below a forecast from the International Grain Council.

The falloff in production is driven primarily by a return to average weather, as well as a slight reduction in planted area.

"Forecasts are very preliminary because the condition of winter grains may be significantly affected by weather changes in late April and May."

But despite the falling production, and rising exports, end-stocks will remain relatively high, at 11.13m tonnes, or 28% of total demand.

More competitive supplies

The bureau saw exports supported by increase competitiveness of Russian wheat in international markets, thanks in part to these carry-over stocks.

"High beginning of 2017-18 stocks of grain will continue pushing domestic prices down… traders and the Russian government will continue developing foreign markets for Russian grain, and the rouble will be less volatile," the bureau said.

The rise in exports will make up for slower than expected grain shipments this year, as the bureau cut its forecast for 2016-17 exports by 1.5m tonnes, based on reported shipments up until last month.

"These exports did not meet traders' expectations or preliminary forecasts for 2016-17," the bureau noted.

Ukrainian exports to fall

Ukrainian wheat production is forecast to fall by some 3.0m tonnes, to 23.9m tonnes next season.

This is some 600,000 tonnes below the production forecast by the International Grain Council.

The drop is driven by lower winter wheat plantings, "which is not expected to be offset by spring plantings".

But the USDA bureau in Kiev sees exports in the current marketing year at 15.9m tonnes, 1.4m tonnes below the official USDA forecast, and down 9% year-on-year.

Wheat exports are seen falling to 12.9m tonnes in 2017-18, "based on expected lower production area and conservative yield forecasts".


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