Russia’s Wheat Exports and Prices Register a Fall in MY 2021-22
Russia’s gigantic wheat production volumes are large enough to both meet its domestic consumption demand and make the country the largest wheat exporting country in the world. Russia supplies wheat to over 10 countries and its largest buyers include Egypt, Turkey, Bangladesh, Nigeria, and Yemen. According to the latest data released by USDA, Russia’s wheat exports in the Marketing Year (MY) 2021-22 (July 2021 to June 2022) are projected to fall from 38.5 million mt in MY 2020-21 to 36.5 million mt in MY 2021-22, a YoY decline of 5.19%. The forecasted fall in exports was due to adverse weather conditions, and specifically, the extremely dry and warm summers. Russia’s wheat production in the first 6 months of the MY 2021-22 stood at 79.1 million mt, which is a 10.21% YoY decline compared to the 88.1 million mt produced a year ago.
According to the data released by the Russian Federal Service for Veterinary and Phytosanitary Surveillance, between 1st July 2021 and 13th January 2022, Russia exported 22.7 million mt, down 18% YoY. Apart from the lower production, the wheat export volumes have been negatively impacted by the interventions from the Russian government to keep domestic wheat prices under check. In December 2021, Russia introduced new export tax mechanisms and export quotas to control the volume of wheat exports. As per the latest regulations, if wheat prices reach USD 375/mt the export tax increase in comparison to the previous levels. The export tax is an addition to the variable export tax implemented by Russia in June 2021. Russia has also implemented an export quota of 8 million mt on wheat between 15th February 2022 and 30th June 2022.
The sluggish export volumes have impacted the export prices of Russian wheat in the global market and regulatory measures have been successful in controlling the domestic prices. Wheat exports prices have fallen down over 4% in January 2022 and it is expected that the price will fall even more as the prices in the global wheat market also soften. In addition, the Russian Ruble (RUB) fell against the USD after the geopolitical tension between Russia and Ukraine came into the limelight. The value of RUB against USD fell from 0.141 on 10th January 2022 to USD 0.0126 on 24th January 2022. As export prices of Russian wheat declined in the global market, the government also decided to cut down the export tax from USD 98.20/mt in January W2 to USD 97.50/mt in January W3.
Source: Trading Economics.
With a cut on variable export tax on wheat exports, Russia’s wheat export volumes might be revived and match the levels of the previous MY. Furthermore, the weather conditions in Russia have been favorable enough to produce good winter wheat crops. The volume of wheat will also likely increase in the market, leading domestic prices to stabilize. The outlook for MY 2022-23 remains positive as wheat production is projected to reach 80.58 million mt, a YoY increase of over 6%. However, the impact of global politics, weather, and dynamic trade regulations are set to shape more of Russia’s wheat exports in the coming year.