(Bloomberg) — Russia’s wheat crop could reach a historic 100 million tons, according to adviser SovEcon, as raw material piles up at home as the nation struggles to export large volumes.
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Farmers across the country complete the bountiful harvest after good growing conditions over the summer. The huge supply from the world’s largest shipper would normally help drive down world prices. But so far this season, government export tariffs and logistical problems from the war in Ukraine have kept more grain than usual in the house.
“Storage has been an issue for some farmers for a few months now,” SovEcon director Andrey Sizov said by phone. “We haven’t seen anything like this since 2017-18.”
Russian wheat export prices have recently become more competitive against other countries such as France and the US, meaning shipments could increase. Higher prices and problems with shipping Russian cargo – some insurers and banks are avoiding Russian commodities after the invasion of Ukraine in February – slowed exports earlier in the season. Food exports are not the target of sanctions, but some institutions are reluctant to do business with Russia as a result of those measures.
Wheat prices rose worldwide after a Russian blockade of Ukrainian ports choked that country’s exports, pushing food prices up. While a deal to reopen ports in July helped drive prices down, the escalation of the war in Ukraine has seen wheat return to pre-deal levels.
The International Grains Council also increased its estimate of Russia’s wheat crop by nearly 6 million tons on Thursday, but doesn’t expect that additional supply to leave the country, leaving the export outlook unchanged at 36.5 million tons. Consultant IKAR also increased its wheat crop estimate to 99 million to 100 million tons, according to Interfax.
“This huge harvest is not fully converted into huge exports,” said Sizov of SovEcon.
(Updates with IKAR prediction in sixth paragraph)
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