Russia is set to become the world's second largest wheat exporter in the 2015/16 marketing year, eating into Canadian and the US market share, owing to a weak rouble and a decline in supplies from its main rivals, the SovEcon consultancy said. Russian wheat exports are running at a historically record pace this season, which lasts until June 30, thanks to a large crop of 61 million tonnes in 2015 and the weaker rouble.
Global prices are, however, depressed and leading exporters have to compete for a smaller market share due to the oversupply and the 2016/17 season is expected to start with high stocks. "Towards the end of the 2015/16 season, Russia will apparently renew the record level of the previous season," SovEcon, a leading Moscow-based agriculture consultancy, said in a report prepared for Reuters.
"Total grain exports will reach 33.0-33.5 million tonnes, including 23.0-23.5 million tonnes of wheat, which make Russia the second largest wheat exporter after the European Union for the first time," it added. The US Department of Agriculture (USDA) also expects Russia to be in No 2 spot after the European Union in the 2015/16 marketing year with exports of 23 million tonnes.
The previous season, Russia was fourth after the EU, United States and Canada with exports of 22.8 million tonnes. Supplies from the three rivals are expected to decline this season. Russia's rise to second place on the list will be achieved mainly thanks to large supplies in the previous months when the rouble was even weaker than it is now, SovEcon said.
"The peak of fulfilling contracts, signed during a significant rouble fall in December-January, has already been passed," its analysts said. The rouble has strengthened to 67 against the dollar from as low as 85.99 in January, making Russian wheat prices less competitive in dollar terms.
Domestic prices are declining in rouble terms, but they are not offseting the rouble's growth - partially due to support from government purchases into state stocks. "In current conditions, the rouble's further growth may lead to a significant decline in grain exports, mainly of wheat, in April and May," SovEcon said.
In March, grain exports are expected to reach 2.3 million tonnes, including 1.4 million tonnes of wheat, down from the previous month but up year-on-year. As a result, Russia's July-March grain exports may reach 28.5 million tonnes, an increase by 2 million tonnes on the same 2014/15 period. In February, grain exports jumped to a record level for the month of 3.2 million tonnes from 1.8 million tonnes in January and were higher than the consultancy had expected. The February data was probably inflated by the customs service after it added wheat supplies previously classified under temporary declaration measures, SovEcon said. According to port data, Russia exported 2.8 million tonnes of grain, including 1.85 million tonnes of wheat, in February.
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