Russia expands dominant position in world wheat trade
11 сентября 2023 года
Russia’s influence in international wheat trade has not been damaged so far by its war on Ukraine, as its exports in 2023-24 are expected to reach a record high.
Russia’s IKAR agriculture consultancy recently increased its forecast for the country’s wheat to 91 million tonnes, up from 89.5 million in its latest forecast. | Reuters photo
Wheat farmers there enjoyed mostly good growing weather this season and while production might not reach the almost unbelievable heights of last year’s crop, the latest forecasts show they have another bin-busting harvest, although its quality might not be that good.
Russia’s IKAR agriculture consultancy last week increased its forecast for the country’s wheat to 91 million tonnes, up from 89.5 million in its latest forecast. It thinks wheat exports will climb to 49.5 million tonnes. IKAR’s estimate for last year’s crop production was 99 million tonnes.
The U.S. Department of Agriculture has smaller estimates. The explanation might be explained by IKAR including production from occupied Ukraine while USDA forecast is for Russia only. The USDA’s forecast for Russia is 85 million tonnes of production and 48 million tonnes of exports.
Although Russia’s crop this year might be a little smaller than last year’s, its total supply will be record high, at more than 101 million because of the large carry-over from last year’s production.
Much has been written about Russia’s transformation from a wheat importer in the 1970s to the leading exporter today, but some numbers are worth repeating.
Ten years ago in 2013-14, it exported 18.6 million tonnes, putting it at the same level as Australia and behind the European Union’s 32 million, Canada’s 23.3 million tonnes and the United States’ 32 million tonnes, using USDA data.
This year it is forecast to export a leading 48 million tonnes, while the EU is set to export 38.5 million, Canada 24.5 million, Australia 21.5 million and the U.S. 19.1 million, again using USDA forecast data.
If Russia can meet this forecast, it will account for 23 percent of world wheat trade, up from 21 percent last year.
A large part of Russia’s wheat exports go to Turkey, Egypt, Iran, Saudi Arabia, Sudan and Algeria.
Russia’s crop export expansion is mostly limited to wheat, however. While other crop exporters have kept their ports expanding with increased shipments of oilseeds and corn, Russia moves only minor amounts of those products, except for sunflower seed and oil.
Russia’s increased wheat exports last year and this year helped to offset Ukraine’s reduced wheat exports.
On July 17, Russia backed out of the Black Sea Grain Initiative agreement that allowed Ukraine grain to be exported by sea and has been bombing grain export infrastructure around Odesa and other Ukrainian ports.
Western sanctions on Russia do not include food exports, but they have knock-on effects on banking and ship insurance that impact wheat shipping, although not so bad that it couldn’t achieve record exports in 2022-23.
Nevertheless, the restrictions complicate Russian exports. Most of the major international grain trading companies are no longer involved in Russian exports. And the Reuters news service recently reported insurance costs for ships traveling to Russia’s Black Sea ports have sky high risk premiums. It also reported Russia’s wheat exports are increasingly moving on a “shadow fleet” of older, smaller vessels often operated by companies registered in Turkey and China.
Russia’s complaints about these situations caused it to end the shipping agreement. It also demanded that the 2,500 kilometre Togliatti, Russia-to-Odesa ammonia pipeline should be reopened and that restrictions on agricultural machinery parts shipments to Russia be lifted. The ammonia pipeline had been closed since Russia invaded Ukraine and in early June this year saboteurs blew up a portion of the pipeline where it runs through Ukraine.
Turkey, which controls access to the Black Sea, has been working with the United Nations to convince Russia to again allow safe passage of grain ships from Ukraine.
Russia faces allegations it is “weaponizing” food by blocking Ukraine crop exports. To revive Russia’s reputation, President Vladimir Putin promised to a recent gathering of African leaders that his country would donate 50,000 tonnes of wheat to seven poor countries on the continent.
But that is a drop in the bucket and was strongly condemned as inadequate by UN Secretary General Antonio Guterres and others.
Russia might also try to make friends with India.
A Reuters story on Aug. 17 quoted sources who said the two countries were negotiating the possibility of Russia supplying as much as eight to nine million tonnes of wheat at discounted prices. India’s government is concerned about high wheat prices adding to food cost inflation.
India had a smaller than expected crop last year, causing it to block wheat exports. Rising prices this year, coupled with a disappointing monsoon rain season, has the Indian government taking measures to tame prices but millers are urging more significant action, including ending the 40 percent tariff on wheat imports.
There has been no official announcement of Russia-India grain talks.
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