The tax, combined with winter grain crops in poor condition heading into dormancy, is expected to boost wheat prices SovEcon has further slashed its 2020-21 Russian wheat export forecast, which could mean rising prices. The Russian agriculture consultancy firm is now predicting 36.3 million tonnes of exports, down from its November forecast of 40.8 million tonnes. That is well below the U.S. Department of Agriculture’s December estimate of 40 million tonnes. SovEcon’s drastic reduction is in response to Russia’s announcement that it is imposing an export tax of 25 euros (US$30.63) per tonne on Russian wheat between Feb. 15 and June 30. SovEcon initially thought the tax would slice exports by two to three million tonnes. However, it adjusted that estimate downward after analyzing what happened when the Russian government imposed a similar tax in the 2014-15 crop year. “They introduced an export tax in February 2015 and straight after that all exports collapsed,” said Andrey Sizov, managing director of SovEcon.
Shipments plummeted from about two million tonnes per month in the November through January period to about 500,000 tonnes per month for the remainder of the year, picking up slightly in June to about one million tonnes. The decline had nothing to do with seasonality. Exports typically rise during the February through April period. Sizov is comfortable in his new export forecast. If anything, he thinks there will be further downward adjustments in the coming months. Russia’s reduced role in export markets should eventually boost world wheat prices if Sizov turns out to be correct. That is already happening to some degree. “It definitely is getting bullish and I think it’s not fully factored into Black Sea wheat prices,” he said. One corroborating bullish factor is that Russian farmers are receiving record high prices (in rubles) for all of the major crops that they grow. As well, they have been selling sunflowers at a record pace. As a result, farmers have already generated the cash required for the 2021 spring seeding campaign. If they need to earn more they can sell crops like corn and barley, which do not face an export tax.
The other major factor is that 22 percent of Russia’s winter grain crops were in poor condition heading into dormancy, which is the worst shape in the past decade. A dry autumn has been followed by a winter with little snow cover. There is potential for “huge winterkill,” said Sizov. Many Russian farmers think they could be in for better prices next year and are willing to hold on to their 2020-21 crop until the export tax expires June 30. Another reason he is bullish wheat is because Ukraine is running out of stocks. The country implemented a 17.5 million tonne export quota for the 2020-21 marketing year and as of Dec. 16, exporters had already filled 70 percent of that quota. Sizov also believes France’s MATIF wheat market is not properly reflecting the “extremely tight” supplies in the European Union. He anticipates sluggish sales from Russia, Ukraine and the EU for the remainder of 2020-21.