Exports to fall to eight million tonnes | Production problems in other parts of the world will send buyers to North America
Russia’s exit from the wheat market is likely only weeks away, says an industry analyst.
“By the end of this month they’ll be a real non-entity in exporting wheat,” said Neil Townsend, director of CWB Market Research.
He doesn’t know if it will be a formal exit in the form of a government imposed export ban or tariff or just market forces at work.
Russia is rapidly approaching the point where it costs more to move wheat to export position than it does to ship it to Russian cities.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
The U.S. Department of Agriculture expects eight million tonnes of Russian wheat exports, down from 21.6 million tonnes in 2011-12.
That will leave a lot of its customers in the Middle East and North Africa searching for alternative suppliers.
The problem is that some of the usual candidates like Ukraine, the European Union and Australia have all had production problems.
“The only two countries with really improved wheat export prospects are Canada and the U.S.,” said Townsend.
Russia’s two biggest wheat customers are Egypt and Turkey. Townsend said it’s unlikely Canada would get business from Egypt but it could see more sales to Turkey, which is one of the world’s biggest flour exporters.
The USDA forecasts Canada’s wheat exports will rise 1.9 million tonnes from 2011-12 and U.S. sales will jump 4.4 million tonnes.
Townsend thinks the incremental increase in U.S. exports could be closer to six or seven million tonnes.
“When all the buyers start to show up in North America demanding wheat, then you’ll see the prices rise,” he said.
“Wheat has another rally in it.”
The question is, what will be the starting point of that rally? The entire grain complex could be lower than it is today if South America harvests 150 million tonnes of soybeans.
However, Townsend said wheat prices could head up after the market comes to grips with the southern hemisphere’s wheat harvest, which starts toward the end of November.
The USDA forecast Australia’s wheat crop at 26 million tonnes, down 12 percent from last year, and Argentina’s at 11.5 million tonnes, down 23 percent.
Private forecasters peg Australia’s crop even smaller.
A disappointing southern hemisphere crop will make buyers even more reliant on U.S. and Canadian wheat.
Townsend believes Brazil could be in the market for an additional one to two million tonnes of North American wheat.
“By the time Brazil needs it, there will be nobody left to sell them wheat. The only market they can come to is Canada or the U.S.,” he said.
