October 2, 2014

Despite a bumper crop, Russian wheat has made a sudden exit from export markets as domestic demand and prices jump as a result of the country’s ban on Western agricultural products enacted in early August, and a population increase of 3 million people brought by the Ukraine crisis.  Without imports, the demand for domestically produced meat and poultry is rising and with it the demand for grain from pork and poultry producers.  An increase in population of 3 million following the annexation of Crimea and from refugees crossing the border into Russia from Ukraine has also put pressure on supplies and driven up prices.  Russia domestic grain demand is forecast to reach 71 million tons –up from 67 million tons last year, and demand for wheat is expected to rise 1.5 million tons to 36.5 million tons according to SovEcon.  Russian grain exports for September fell to 3.7 million tons from a record 4.6 million tons in August as Russian wheat was priced out of global markets and Russian business is foreseen by traders as being shifted to countries in the EU.  Russia is expected to have an exportable surplus of 27 million tons to 30 million tons of grain, of which wheat will account for 70% if the country harvests 100 million tons.  Upon harvesting 81% of its planted area Russia has harvested 96.1 million tons of grain to this point.  It is hoped by Russia exporters that Russia may return to its export markets in a matter of months if prices can recede to a globally competitive range.

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