Rising From the East: Russian Wheat Exports Flourish Beyond Expectations

Moscow: Russia's grain exports are on the rise, but the country is trying to conceal them from public view. The U.S. Department of Agriculture, however, has found a way to track these exports despite Russia's attempts at secrecy. The USDA's Foreign Agricultural Service had to depend on alternative data sources to monitor the situation when Russia stopped publishing its customs data from March 2022. By using port loading and vessel data, the USDA can now track where Russia's grains and oilseeds are being exported.

Recent data indicates a notable increase in Russian Wheat exports to the Middle East and Africa during the first ten months of the 2022-23 campaign, compared to the corresponding period in the previous year. To gauge trade volumes, the USDA is utilizing import data from key trading partners, including Egypt, Turkey, Saudi Arabia, Iran, Kazakhstan, and Nigeria. The USDA predicts that Russian Wheat exports will reach 44.5 million tonnes in 2022-23, marking a 36 percent increase from the previous year and surpassing the previous record of 41 million tonnes set in 2017-18 by 3.5 million tonnes.

Ukraine's permanent representative to the United Nations, Sergiy Kyslytsya, raised concerns during a UN Security Council meeting that Russia is using blackmail tactics to disrupt the Black Sea Grain Initiative. Despite Russia's grain exports increasing, they are falsely portraying themselves as victims of the agreement. Shockingly, Russia continues to present itself as the losing party. Ukraine shipped only 50% of its export capacity (less than three million tonnes of grain) through the corridor in April since the underutilization of the corridor resulted from Russia's delay in vessel inspections.

According to the USDA's latest export forecast, Russia is projected to become the world's largest Wheat exporter in 2022-23, with exports far surpassing those of the European Union's 34.5 million tonnes and Australia's 31 million tonnes. Though Wheat exports by sea have averaged 3.5 million tonnes per month, with Turkey, Egypt, Iran, Saudi Arabia, Sudan, and Algeria being the top markets, shipments have recently slowed down significantly, with only 680,000 tonnes shipped in the past week - the lowest total since February. It remains uncertain whether this trend will continue, but for now, it seems that the demand for Wheat has decreased.

According to recent reports, Russia has dispatched considerable quantities of Wheat to countries within the Eurasian Economic Union via trucks or railways, with Kazakhstan being their primary destination. In fact, in the first eight months of 2022-23, Kazakhstan has already imported approximately 1.3 million tonnes of Wheat, which is equivalent to last year's imports and more than twice the amount imported in the two years prior. This indicates that Russia has become a dominant figure in the global Wheat market over the last ten years, offering prices that are lower than the U.S. hard red winter Wheat in crucial markets worldwide.

Russia has been able to capture a significant portion of the Wheat markets in Turkey and Egypt due to its competitive pricing. However, the country's market share could be even higher if it did not have a floating export tax in place. Since its inception in February 2021, the tax has ranged from US$30 per tonne to almost $150. As of early-May, the tax stood at around $60 per tonne. Although the tax has increased export prices for Russia, it has lowered farm returns. Despite this, farmers are still keen on planting the crop.

Russian Wheat growers have made significant progress in seeding spring Wheat this year. As of May 4, an impressive 8.65 million acres have already been seeded, which is 2.7 times the pace seen last year. The favourable weather conditions and ample precipitation levels in central and southern Russia have certainly played a role in this achievement. It is forecasted that the total area of spring Wheat will be like last year's at 32 million acres. Looking ahead, experts anticipate that the Russian Wheat crop will yield 86.8 million tonnes by 2023-24. Despite the USDA's slightly lower forecast of 81.5 million tonnes, record-breaking exports of 45.5 million tonnes are still expected due to the crop's large carryover.