Russia's exporters accelerate grain exports

Exporters in Russia will accelerate their grain exports in the months to come as they fear export restrictions from December. Speculation about possible export restrictions at the world's largest wheat exporter had pushed up the stock market prices on Friday. Fear of narrower market supply following drought-limited harvests on the Black Sea, in Europe and in Australia.
The estimate for Russia's wheat harvest in 2018 has since been reduced by the USDA to 68 million tonnes. In the previous year, 85 million tons were harvested there. This is still a big crop relative to the 5-year average, but last week compound feed producers in Russia asked their government not to export an unlimited amount of grain because they fear the country's feed costs are rising too much. Therefore, on Friday, wheat exports were limited to 30 million tonnes in the 2018/19 marketing year, which began on 1 July.
As a result, Russian farmers no longer offered grain for export to extort higher prices. In contrast, exporters want to export more grain as soon as possible.They expect a scenario where the ruble exchange rate and poor grain quality will only allow a free and liquid grain market until January. In the second half of the season (January to June 2019), shipments will be less and dealers will be more cautious with sales. Only right when export restrictions threaten.
Lower exports from Russia are further restricting the global grain market and competitors in Europe and the US are getting more opportunities to deliver. From 1 July to 15 August, Russia exported 6.8 million tonnes of grain. This is an increase of 46% over the same period last year, because the 2018 harvest started very early. This includes 5.5 million tonnes of wheat. On Friday, the Russian Ministry of Agriculture estimated wheat exports in 2018/19 at 35 million tons.
It is also not clear what mechanism Russia wants to apply to potential export restrictions. The export duties are set to zero percent by 1 July 2019. In 2010, Russia shocked the world market with a total ban on grain exports because the crop was very small. In 2015, informal interventions were used, making it difficult for traders to offer Russian grain.As a result, traders currently have an easier time adjusting their business to an export restriction.
Traders are hoping that the export restriction to 30 million tonnes will be lifted as the rally continues as long as the ruble exchange rate remains stable. The exchange rate is currently as weak as it has been since April 2016, because the US has imposed sanctions on Russia. Thus, the plans of the Ministry of Agriculture could be guided by higher political interests. Although the Russian government is seeking more food exports, the provision of local markets has top priority.

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