New season has just started but obviously, it will be rather difficult year. Wheat quality as well as currency rate and S&D balance will determine price trend. Despite slow price development during July-August, market operators are sure that prices will increase in future.
Ahead of harvesting campaign market operators concentrated on wheat condition and forecasts of crop volumes and quality. Abundant rains affected the grain quality, market insiders informed about protein removal, sprouting etc. As a result, there was no expected seasonal price decline in May-June, in contrast the market saw price growth by average 2000 RUR/t. Price decrease in July was short followed by price stabilization, however, this trend is expected to change.
|
Wheat production in Russia |
|||||
|
|
2012/13 |
2013/14 |
2014/15 |
2015/16 |
2016/17 |
|
Planted areas, `000 ha |
24 684 |
25 064 |
25 277 |
26 833 |
27 695 |
|
Yield, t/ha |
17,7 |
22,3 |
25,0 |
23,9 |
24,1 |
|
Production, `000 tonnes |
37 720 |
52 091 |
59 711 |
61 786 |
64 504 |
|
Source hereandafter: APK-Inform Agency |
|||||
Manager of grain department at Artis-Agro Export LLC, Daniil Tikhonov:
“In general, grain quality in the country is heterogeneous, quality can differ significantly among the region. For instance, there is high share of sprouted grain and problems with falling-number in Central FD. Unfavorable weather during maturation and harvesting caused quality decrease. Despite high production, there is high demand for 12.5% wheat from exporters as its share in total crop volume is lower causing upward price trend.
This season has one feature – feed wheat is not only used as mixture to form export lots, but also is exported separately. Russia did not export such large volumes of feed wheat before. Higher share of 11.5% wheat can lead to higher shipment to South-East Asia where feed wheat is of high interest.”
Head of trade department at Verkhnekhavskiy elevator, Dmitriy Kononenko:
“Voronezh oblast has much lower wheat quality than year ago. Alost all wheat we harvested during prolonged rains is of low quality feed grade. As a result, Central Black Earth region sees a lack of 3rd grade wheat. Usually the grain has low gluten and protein content, falling-number, however, often it can meet GOST standard. Moreover, grain impurity is higher while usually it varied from 6 to 7%. For example, often we received wheat trucks with 25% gluten, 14.7% protein but impurity at 7% and higher. Such grain can be used as feed only. We suppose that higher prices for material and technical resources also led to lower wheat quality.
There is high price difference between wheat grades thus season, surely, 3rd grade will be of high interest during whole season. Supply of 4th grade is higher but quality is not so good. Only feed wheat supply will be high.”
Head of procurement department at Zernotorg LLC, Viktor Avdievskiy:
“We faced lack of 3rd grade wheat in August. On the third week of August, prices started to increase and reached 10000-10500 RUR/t CPT in Tula oblast and 11000-11400 RUR/t CPT in Moscow oblast. At the same time, prices for 4th grade and feed wheat were stable as supply exceeded demand. The first reason for such high 3rd grade wheat prices is its small crop. Out of 40% of wheat harvested in Tula and Ryazan oblasts only 10% was presented by 3rd grain wheat. Thus, with high prices farmers will try to offset quality losses. This trend is typical for whole country except Siberia where the quality is good and gluten is 25% and higher.
Today we heard everywhere about record production in Russia, but there is a question who to market it. Distilleries will benefit as they have the lowest quality requirements and have the highest margin under such conditions. Millers and exporters can face difficulties and higher competition.”
Head of sales department at VAPK LLC, Nikolay Mandrykin:
“Volgograd oblast faces high problems with grain quality. 3rd grade wheat is almost absent. Shares of 4th grade and feed wheat are 55% and 45% correspondingly. Despite record production, the quality is rather low. Adverse weather was the key reason. Prolonged rains affected crop during both maturation and harvesting. Gluten and protein content declined. I suppose that quality problems will be key price determining factors rather than currency fluctuation. Now price difference between 3rd grade wheat and feed is about 3000 RUR/t, while usually it does not exceed 1000-1500 RUR/t. It is hard to foresee the maximum price food wheat can reach this season as competition between millers and exporters is growing. At the same time, demand for feed is going down due to oversupply.”
Harvesting in European part is under way and is gaining pace in Ural and Siberian FDs, so it can be too early to estimate finally wheat quality. However, the price situation reflects the problem and market operators prove that the share of 3rd grade wheat in total production will be lower that year ago.
Alexandrina Ovdienko, APK-Inform Agency
