IKAR: Russian Wheat Shipments Set to Slow After Record Early Pace

* Exports expected to gradually slow: rail operator Rusagrotrans
* Russia 2023-24 harvest seen 10% smaller than previous year

Russia traditionally exports more of its crop in the first half of the season, from July to December, as ice impedes river navigation later in the winter.Photographer: Vladimir Nikolayev/AFP/Getty Images

Top wheat exporter Russia will struggle to maintain its record pace of shipments over the next few months, potentially shoring up languishing global prices.

After matching last year’s record-breaking export volumes in August and September — despite a smaller crop — monthly shipments are expected to gradually slow for the rest of this year before dropping more strongly from January, according to the analytical center of railway operator Rusagrotrans.

The frenetic pace of shipments comes as a new generation of traders vie for market share in the first half of the season, which determines quota allocations for the rest of the year. However, frosts and dry weather have cut Russia’s 2023-24 wheat crop by about 10% from the previous year, which will eventually slow exports. That could support global wheat prices.

“By the end of the calendar year, South Russian wheat and all grain supplies will be very tight,” Dmitry Rylko of consultancy IKAR said at the IAOM conference in Baku this week. He expects regional grains prices to start increasing gradually from November.

Russian Wheat Shipments Set to Slow After Record Early Pace

Global wheat prices were trading near a four-year low last month, despite the smaller harvests in Russia and Europe, as some big buyers stayed out of the market and bumper crops in the US bolster supplies.

Russia traditionally exports more of its crop in the first half of the season, from July to December, as ice impedes river navigation later in the winter. But that trend has been accentuated this year, with the biggest volumes in July and August being delivered to Egypt, Bangladesh, Turkey and Algeria, according to Interfax, citing Rusagrotrans.

Eight new companies are eating into the market share of the previous top trader TD Rif, according to IKAR. The decline of TD Rif — now renamed Rodnie Polya — is the latest upheaval in Russian grain trading after Western companies exited following the invasion of Ukraine. That had been expected to benefit other existing major players, some of whom have links to the state.

Competition between a new generation of traders has combined with Russia’s quota system and high interest rates — that incentivize farmers to hold cash — to boost shipments in the early part of the season. The Kremlin usually puts in place an export quota for February to June, which allocates volumes to traders based on how much they shipped in the first half of the season.

Quotas have not been restrictive in the last two seasons after Russia reaped record crops.

“We expect a very serious strain on the market in the second half of the season” deputy general director at Russian state-backed exporter OZK Ksenia Bolomatova said in Baku. Some of her company’s long-time clients are waiting before making purchases, she said, but “we are warning them against it.”

Russian Wheat Shipments Set to Slow After Record Early Pace