Russia Wheat Stocks Swell

Despite exporting more wheat than any other country in 25 years, Russia’s grain inventories are still in record territory. ( MGN )

(Bloomberg) -- Russia’s wheat stockpiles are set to swell to the highest levels since at least Soviet times, keeping its prices low in a blow to European Union rivals hoping their exports will be able to compete against Black Sea grain in the months ahead.

Despite exporting more wheat than any other country in a quarter of a century, Russia’s inventories are still projected to leap almost 50 percent to a record 20.6 million metric tons, according to Moscow-based consultant SovEcon.

That may make it harder for France, the EU’s biggest exporter, to rebuild share in overseas markets even after Russian prices rose to an almost three-year high of $208 a metric ton, $4 more than French wheat. High levels of Russian stockpiles may restrain its prices in coming months, while a weaker ruble in recent weeks means the nation’s wheat is cheaper in dollar terms.

“High stocks and relatively low ruble prices will ensure that Russia will stay competitive versus EU exports through this season end,” SovEcon Managing Director Andrey Sizov Jr. said.

EU farmers have been struggling to compete with a deluge of cheap Russian exports into world markets, with the trade bloc’s outbound shipments down by more than a fifth from last year. The euro’s rise to more than a three-year high against the dollar also hurt competitiveness.

That’s reflected in sales to Egypt, which vies with Indonesia as the world’s biggest wheat buyer. Just one 60,000 ton cargo of French wheat has been sold to the country in government tenders this season. In contrast, Russian grain accounted for 79 percent of sales.

The Moscow-based Institute for Agricultural Market Studies, or IKAR, raised its export forecast for the current season this week. IKAR sees flat Russian wheat export prices given prospects of another bumper Russian harvest ahead. Meanwhile, crop office FranceAgriMer cut its export estimate for France, and Strategie Grains did the same for the EU.

“If Russian prices go down again and we lose competitiveness in Morocco and Western Africa markets, then the current FranceAgriMer target will be very, very hard to reach,” said Alexandre Boy, an analyst at farm adviser Agritel in Paris. “It’s a good thing to see French prices below Russian prices, but we will still need $3 or $4 per ton more of competitiveness to be able to capture more market share.”

Copyright 2018, Bloomberg News

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