The first half of 2015/16 MY faced the next key moments: slow increase of wheat and wheat-flour production, fast pace and record volumes of flour exports, high pressure from feedstock market, growing domestic market prices.
Domestic market: feedstock pressure
In the first half of 2015/16 MY (July-December) wheat and wheat-rye flour production increased by 2% on year to 4.9 mln tonnes. However, despite stable production, bullish trend prevailed on the market. Limited supply of milling wheat, high demand on wheat and high competition between processors and exporters as well as unstable currency situation.
Start of the season was characterized with absence of seasonal price decline and prevail of rather stable price trend. In June-July selling prices for top-grade flour in European part were stable at 14600-17500 RUR/t EXW and in Ural and West-Siberian districts at 16500-18500 and 15700-17500 RUR/t EXW correspondingly.
By the middle of August wheat supply had declined and processors were forced to raise flour offer prices due to higher costs of feedstock. Bullish trend prevailed until late November and top-grade wheat flour offer prices reached 16000-18500 RUR/t EXW (European part) and 16000-19500 RUR/t EXW (Ural and West-Siberian districts).
Price trend changed by December and flour offer prices started to decline. Supply of milling wheat increased. Processors needed to increase volume of sales due to high competition and rising stocks. By the end of the year selling prices for top-grade wheat declined by average 500-800 RUR/t to 15000-17500 RUR/t EXW (European part) и 15500-18700 RUR/t EXW (Ural and West-Siberian districts).
Starting from the 2nd half of January unstable milling wheat price situation lead to some increase of flour prices in some regions of European part of Russia. At the same time, processors declined maximum selling prices in West-Siberian district to increase trade activity. 
Currently minimum offer prices for top-grade flour is going up in European part. However, processors could not raise selling prices for 1st grade flour due to low demand. There is stable price trend in West-Siberian district due to high competition among flour producers.
Export market goes to record
The first half of the season was characterized with fast pace of exports. According to Russian customs data, the country exported 151.8 thsd tonnes of flour during July-January, that is 2% higher that total volume exported in 2014/15 MY and is the highest on record for this period within 3 years. APK-Inform forecast Russia to export 250 thsd tonnes of wheat flour in 2015/16 MY (149 thsd tonnes in 2014/15 MY).
UAE (21%), Georgia (14%), China (13%), Turkmenistan (11%), Abkhasia (9%) and Mongolia (9%) were the largest exporters of Russian flour.
Export market faced bearish price trend during July-September and flour export prices declined by average 20 USD/t. Offer prices for 1st grade wheat reached 220 USD/t FCA in South district and 215-233 USD/t FCA in West-Siberian district. 
Prices started to increase in November due to higher prices on inner market and reached by December 220-240 and 230-250 USD/t FCA in South and West-Siberian districts correspondingly. Starting from the 2nd half of January devaluation of Russian ruble and lower demand caused price decline to 200-230 and 210-245 USD/t FCA in South and West-Siberian districts correspondingly. 
Expectations of market operators
Market operators do not expect for lower flour prices on domestic market due to bullish trend on milling wheat market. Prices can increase in the 2nd half of the season. Feedstock market and demand will determine price situation.
Polina Kalayda, APK-Inform Agency
