Andrey Sizov, president of SovEcon in Russia, said Russia would remain the world’s leading wheat exporter in a presentation June 6 at the International Grains Council Conference in London.
“Colossal changes have taken place in Russia and Russian agriculture,” he said. “The sowing of autumn crops was quite successful and the area increased by about a million hectares. Winter losses were insignificant. Russia is expecting a good crop.”
He predicted the total grain harvest in 2017 will reach 107 million tonnes.
“We’re expecting a decline in wheat of about 9 million tonnes,” he said, adding that would bring it to around 64 million compared with the USDA estimate he gave of 67 million.
“Russia is entering the new season with record high stocks,” he said.
He did identify quality concerns with what Russia has to export. “Delay in harvest affected quality,” he said. “The quality of stocks is not quite high.” In addition, domestic prices were down because of pressure from the high level of stocks. “Millers were looking for the right quality,” he said. “This created difficulties for exporters.”
Export prices, however, remained steady. These prices are supported by the ruble,” he said. However, it has appreciated.
“It means that the competitive advantage of Russian exports is much less,” he said. “Our forecast for export to wheat is 27.3 million tonnes in the outgoing season. Barley was quite a failure. Exports of corn will be a record high, which is over 5 million tonnes.”
“I’d like to draw your attention to a great growth of domestic consumption,” he said, pointing out that consumption of grains had risen by 5 million tonnes in 2016-17. “We think that this is because of cattle breeding and also because of poultry and pig breeding.”
The ruble rate will influence Russian exports, he said. “Some of our leading experts think the ruble will weaken,” Sizov said. He expected 2017-18 wheat exports to be around 27 million tonnes, but that depended on the ruble and on quality. Russia has an intervention stock problem.
“State intervention stocks are around 4 million tonnes,” he said. “That’s a lot. Currently the state cannot fund the storage of that grain.” It’s done by paying independent elevators.
“Something has to be done with these 4 million tonnes of stocks,” he said. “One proposal is to export them. The 2016 harvest was bought at a very high price, so that grain cannot be sold. What could be sold is grain brought in 2013-14.”
No decision has been made and the grain is in the Urals and Siberia, which would mean a cost of about $50 a tonne for rail transport, even before the fobbing cost. That means that about 500,000 tonnes of it probably wouldn’t be exported but would go for domestic sales.
“Russia will be in the group of major exporters of wheat,” he said.