September 20, 2023

 

Russia's record wheat harvest eases global price pressures

 

Russia's consecutive bumper wheat harvests solidify its position as the top exporter while alleviating price pressures linked to the Ukraine conflict, The Business Standard reported.

 

Despite Moscow's war efforts, including port blockades and bombardments in Ukraine, Russian wheat exports continue to thrive. These record shipments have propelled Russia to the forefront of the global wheat market, given that Ukraine's food exports have been severely hampered.

 

Russia's wheat dominance is apparent in its ability to overcome financing and logistical challenges faced by some traders in the aftermath of the invasion. As a result, Russia is maintaining its status as the world's leading wheat exporter.

 

The surplus of grain in Russian ports has had an unexpected benefit for consumers grappling with rising living costs: the lowest wheat prices in nearly three years. Although the Kremlin aims to shore up wheat prices to replenish its own coffers, the Chicago market is trading at less than half the peak observed after Moscow's initial invasion of Ukraine.

 

Helene Duflot, a grain-market analyst at Strategie Grains, said that there are not a lot of competitors for Russian wheat. Russia is the price maker at the moment.

 

In light of the supply glut exerting downward pressure on prices, Russia is attempting to utilise its dominant position to establish a price floor. This strategy aims to appease Russian farmers dealing with reduced incomes and generate additional tax revenues for the Kremlin amid financial strains caused by the war.

 

Russian authorities have sought to enforce an informal price floor for wheat exports, although its application has been inconsistent. Some traders have been forced to renegotiate or cancel deals due to this pressure.

 

The government's enforcement of the price floor can involve withholding export documents for shipments below the designated price, though this practice varies.

 

Despite these measures, the Kremlin's efforts underscore its determination to assert control over Russian grain exports and the global market. The US Department of Agriculture recently raised its forecast for Russian wheat exports, further highlighting Moscow's dominance in this market.

 

-      The Business Standard