Russia – Turkey: rebooting the grain market

11.05.2017

One and a half months after Turkey’s imposition of restrictions on Russian grain and sunoil supplies, the authorities solved the problem of exports to the Turkish market. In the result of the May 3 meeting of the Russian and Turkish presidents, an agreement was achieved to lift mutual trade restrictions between the countries, including removing restrictive duties on Russian grain exports to Turkey but excluding Turkish tomato deliveries to Russia.

Predictably, the adopted restrictions hit both Russian and Turkish businesses. Turkish millers are used to work on Russian food grain, while supplying grain to Turkey is beneficial to Russian exporters. The more so as grey schemes have existed since the duty imposition, therefore Russian wheat shipments to Turkey partially continued with duty evasion, alike Turkish tomatoes still coming to the Russian market, though in far smaller volumes.

Turkish importers have managed to partially replace Russian wheat in the domestic market. According to market participants, over 500 KMT of high-protein wheat of Ukrainian and European origins was contracted for April.

Noteworthy, Russia exported to Turkey by 19% less than at the same time last season. Taking into account that most of the market operated on previously contracted cargoes that did not fall under the ban, no substantial drop in supplies was caused specifically by the above factor. 

So, as UkrAgroConsult expected, neither of the two decisions has substantially influenced at least the volumes of Russian grain exports. Supplies to Turkey had already been declining a long time before that step. In addition, the quality of Russian wheat from the 2016 crop forced exporters to look in advance for partial substitution to traditional consumers.

Undoubtedly, this decision is beneficial to both parties, but it will be more significant for Russian grain, primarily for wheat, already from the new crop, i.e. in the new season.

Full version of the article is available to subscribers for weekly market report “Black Sea Grain & Oil” and “Online market review” by UkrAgroConsult.

 

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