Moscow, Russia (BBN)-Russia may have a harder time exporting its wheat this season as bumper crops expected in Australia and Argentina increase competition for buyers.
Shipments from Russia, the world’s biggest exporter, have so far lagged expectations after a record harvest, reports Bloomberg.
That means the country has more left to sell as the southern hemisphere producers add to global supplies.
Wheat crops in both Australia and Argentina will rise to the highest levels in five years, according to the US Department of Agriculture.
They are the fifth-and eighth-largest exporters, respectively, according to the International Grains Council.
“If they offer discounted prices to compete on our main markets such as Egypt and Bangladesh, things may get more difficult,” Oleg Kryukovskiy, a trader of Russian wheat at GTCS Trading DMCC in Dubai, said by phone.
“It’s a factor we’ll need to take into account.”
Argentina may collect 14.4 million metric tons of wheat, 27 percent more than last year, according to the USDA. Australia’s crop will rise 16 percent from the previous year to 28.3 million tons.
Argentina and Australia end wheat harvesting in January. That’s when supplies from the countries will start coming to market, according to Kryukovskiy.
Russia will probably have exported 13.3 million tons by December since the start of the 2016-17 season in July, according to consultant SovEcon in Moscow.
That compares with 14.4 million tons two years ago, government statistics show, the latest comparable figures because of delays registering cargoes related to a wheat-export tax in later periods.
On the flipside, low prices may curb supplies from southern-hemisphere producers.
Australia won’t sell at prices that are too low, the Australian Export Grains Innovation Centre said. The low cost of borrowing in large wheat-producing nations such as Australia means farmers don’t have to rush to sell their crops to meet repayments, Ross Kingwell, the researcher’s economics and business-analysis manager, said by phone from Sydney.
“A lot of businesses can afford the cost of carrying stocks,” Kingwell said. “Farmers will say, ‘I’m not going to sell at an even lower price. I’ll just hang on to the grain.”’
Yet as winter sets in, Black Sea storms and ice cover in the Azov Sea may hamper port traffic, further slowing Russian exports. In addition, a higher-than-usual share of low-quality wheat, typically used as animal feed, has cut demand for Russian supplies.
Egypt, one of the biggest customers, suspended purchases for most of September over a dispute with traders, and a stronger ruble this year has made Russian supplies less competitive.
Consultants from Moscow to Kiev have cut their estimates for wheat exports from Russia during the 2016-17 season. SovEcon in Moscow now pegs shipments at 29 million tons, down from 30 million.