Black Sea wheat exports to fall as Russian farmers hold back

Wheat exports from the Black Sea countries could be modest in November as Russian farmers withhold crop in expectation of higher prices and as Kazakhstan needs more time to get a clear estimate of the quality of its harvest, traders said.

Russia, Ukraine and Kazakhstan, which are major global wheat exporters via the Black Sea, ship the main volumes during the first half of the marketing season between July and December.

But they become less competitive in the second half against wheat exporters such as France that sell to North Africa, and Australia, Canada and Germany, which ship to the Middle East.

Russia, Ukraine and Kazakhstan were expected to boost their combined crop by 36 per cent to 87 million tonnes and exports by 22 per cent to 30 million tonnes during this 2013/14 season, according to the latest Reuters poll in August.

But exports have been curtailed by low stocks, government restocking, and concerns over lack of high-quality wheat.

“Farmers are not selling now as they are anticipating further global price growth,” one trader in Moscow said. The bullish view among farmers is supported by rising global prices and delayed winter grain sowing in Russia.

The picture of Russian farmers withholding sales contradicts the usual official view that the sector is burdened with heavy debts and thus there is rush to sell at the start of the season. Holding back from selling wheat, farmers sell sunflower seeds to secure working capital, according to SovEcon.

Russia has already harvested 53.3 million tonnes of wheat by bunker weight from 95.4 per cent of sown area. After cleaning and drying, harvest figures would be about 5 per cent lower, according to the ministry.

It is officially expected to export about 15 million tonnes of wheat in 2013/14, of which 8 million had already been shipped between the start of the season on July 1 to Oct. 10.

“Russia has already exported at least half of its wheat export potential in three and a half months. The slowdown in exports is already there and it is something that is going to continue,” Olivier Bouillet, manager of the Kiev office of French grains consultancy Agritel, said.

SovEcon expects October wheat export at 2.1 million tonnes, down from 2.4 million tonnes in September. A trader expects October exports to be below 2 million tonnes and sees it declining further in November and December.

Lower quality in Kazakhstan

Expectation of modest wheat exports from the Black Sea region in November is also supported by dwindling exportable surplus of Ukraine, Romania and lower quality in Kazakhstan.

The Asian country has harvested 20 million tonnes of grains, of which 76.5 per cent was wheat, from 97 per cent of the sown area and expects to get a final estimate of crop volume and quality in November, Nurlan Ospanov, the Board Chairman of Kazakh state grain trader Food Contract Corporation, said.

“The quality of grain is lower, there is more grain of the fourth and the fifth class,” Ospanov, whose quotes were passed to Reuters by the corporation, said. “The grain is damp, the harvesting was tough.”

Late harvesting will also cause Kazakhstan, Central Asia’s largest grain producer, to start main export towards winter, SovEcon said. Its exportable surplus is seen at 9.5 million tonnes of grain and flour, of which 2.2 million tonnes were shipped between July 1 and Oct. 20.