Russian wheat exports expected to decline significantly in March: here’s why

SovEcon, a leading agricultural consultancy, has released its latest forecast for Russian wheat exports in March. 

The firm estimates that exports will reach between 1.4 and 1.8 million metric tons this month. 

This represents a significant decrease compared to the same period last year, when Russia exported 4.8 million tons of wheat. 

It also falls below the five-year average for March exports, which stands at 3.3 million tons. 

The decline in Russian wheat exports is projected to be substantial, with a decrease of approximately 66% compared to the previous year. 

Poor profit margins

This significant drop can be attributed to a combination of factors, including unfavorable profit margins for exporters and a decline in the overall competitiveness of Russian wheat in the global market, SovEcon said.

The primary factor hindering the growth of Russian wheat exports continues to be the slim profit margins associated with these exports, the firm said. 

This limited profitability can be attributed to several interconnected factors, including the high cost of production, transportation, and storage, as well as the fluctuating global market prices for wheat. 

Additionally, the competitive nature of the global wheat market, with other major wheat-exporting countries offering their products at lower prices, further squeezes the profit margins for Russian wheat exporters.

The profitability of Russian exporters has been significantly impacted, with current margins dipping into negative territory. 

This starkly contrasts with the situation in November, where exporters enjoyed a positive margin of approximately $10, according to SovEcon. 

Tense situation 

This substantial decline highlights the challenges faced by Russian exporters in the current market environment.

Bids for 12.5% wheat at deep-sea ports stayed between 17,500 and 18,000 rubles per ton, SovEcon said.

The dynamic between exporters and farmers is creating a tense situation in the grain market. 

Exporters, aiming to secure profitable deals, are actively working to lower bid prices. 

However, farmers, anticipating potentially higher prices in the future, are resisting these efforts by delaying their grain sales, according to the consultancy. 

This standoff has led to a temporary increase in bid prices as some traders, driven by the need to fulfill immediate orders and meet the demands of arriving vessels, have raised their offers to secure sufficient grain supplies quickly, SovEcon noted.

Anticipation of price increases

Russian farmers are holding on to their wheat in hopes of higher prices in the future.

Rosstat reports that on-farm wheat stocks, excluding small entities, were 13.7 million tons as of February 1.

This is a 32% decrease year-over-year and 7% below average, indicating that on-farm stocks are relatively low.

Amid competition from other suppliers, free-on-board prices for Russian 12.5% wheat fell by $2 to $246–250 per ton.

This is the first price drop since the end of January.

The US Department of Agriculture’s February estimate for Russian wheat exports in the 2024-25 season was 45.5 million tons, while SovEcon’s estimate was 42.2 million tons. 

The new WASDE report from USDA is expected to lower the forecast for Russian exports, SovEcon added.

Andrey Sizov, managing director of SovEcon said:

Low Russian export pace may support global prices.