Russia, EU to vie for top spot in key wheat markets in 2017/18
Russia and the European Union are expected to return to strong competition for the rank of the world’s biggest wheat exporter in the new 2017/18 marketing season, which starts on July 1, as prospects for their crops are bright so far, analysts said.
For global consumers, especially in North Africa and the Middle East, this intense rivalry together with strong sales from Australia could translate into lower prices.
“If weather is normal, world wheat prices will grind lower into late summer. But we have to produce a crop,” Dan Basse, president of Chicago-based AgResource Co, said.
“Wheat’s biggest problem is static world trade and the ongoing fight for world wheat market share.”
Russia harvested a record wheat crop in 2016 and is competing for the rank of the world’s top wheat exporter with the United States in the current 2016/17 season. EU’s supplies are weak this season after a poor crop in France.
Russia’s prospects for the 2017 crop look good and record wheat stocks will help its exports next season, analysts said.
Basse expects Russia’s wheat stocks to rise twofold from a year ago to a record 12-13 million tonnes by July.
“Right now Russia looks like it should be repeating 2016/17,” Matt Ammermann, commodity risk manager at INTL FCStone, said about the new season.
At the same time, EU’s crop is expected to rebound next season, and French consultancy Strategie Grains currently sees Russia’s wheat exports at 29.6 million tonnes in 2017/18 while the EU would ship 28.6 million tonnes.
Russian IKAR and SovEcon agriculture consultancies expect Russia’s 2017/18 wheat exports at 28 million tonnes and 27 million, respectively.
“It looks like Russia’s geography and the volume of supplies will remain broadly the same in 2017/18,” Andrey Sizov at SovEcon said.
However, the EU may push Russia out of Morocco and bring back tough competition to Egypt, he added. Australia may also retake part of Russia’s share in the Pacific region thanks to Australia’s record crop.
According to Strategie Grains, Russia may continue large sales to Bangladesh and increase its exports to Turkey.
Russian farmers sowed in the largest area in seven years with winter grains for the 2017 crop partly due to a weak rouble which boosted revenues in local currency terms.
The rouble has subsequently rebounded to around 57 per dollar, the highest level since mid-2015, and its recent strength could slow exports.
Their counterparts in the United States, meanwhile, slashed their winter wheat plantings to the lowest in more than a century.
“U.S. wheat seeding will remain at low levels as other crops like corn and soybeans are seeded. Even the value of the rouble won’t make much of a difference,” Basse said.
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