By SovEcon, a leading agricultural consultancy, has revised its projection for Russian wheat exports during the 2024-25 season.
The firm now anticipates exports to reach 42.8 million metric tons (MMT), marking a decrease from their previous forecast of 43.7 million metric tons issued a month earlier.
Additionally, this marks a substantial decrease from the 52.4 MMT exported in the previous season and also falls short of the three-year average export volume of 44.2 MMT.
This downward revision can be attributed to a confluence of factors.
Slower pace of Russian exports
Primarily, the pace of shipments has been slower than initially anticipated, leading to a backlog in exports.
Additionally, challenging export conditions, which may include factors such as logistical bottlenecks, trade restrictions, or unfavorable market conditions in importing countries, have further impeded trade flows and contributed to the downgrade in the export forecast.
The sluggish pace of shipments has cast a shadow over the export outlook, raising concerns about potential delays, missed deadlines, and the overall competitiveness of exporters in the global market.
This slowdown can be attributed to port congestions, logistical bottlenecks, labor shortages, and disruptions in the supply chain.
These challenges have created a ripple effect, impacting production schedules, inventory management, and customer satisfaction.
As a result, businesses are grappling with increased costs, decreased revenues, and a tarnished reputation.
The prolonged impact of these issues could potentially lead to a decline in export volumes, a loss of market share, and a dampening of economic growth.
Russia’s January exports are projected to reach 2.1 MMT, marking a significant decline of 1.0 MMT compared to the average export volume, according to SovEcon.
This figure represents the lowest export level since January 2022, when exports totaled 2.0 MMT.
This substantial decrease in exports raises concerns about potential market fluctuations and economic implications for industries reliant on export revenues.
Poor margins for Wheat exports
Profit margins for wheat export operations are slim or even negative, which is hindering exporters’ capacity to increase shipment volumes in the near future.
This situation is primarily due to a combination of factors, including international market prices, transportation costs, and domestic production costs.
The lack of profitability is a significant deterrent for exporters to ramp up their wheat shipments.
To achieve a substantial increase in wheat exports in the short term, a significant improvement in profit margins is necessary, SovEcon said.
Therefore, unless there is a substantial shift in the economic factors affecting the profitability of Russian wheat export operations, it is unlikely that there will be a significant pickup in wheat exports in the near future, it added.
Situation remains challenging
The current situation poses a challenge for Russian wheat exporters and highlights the need for strategies to improve the profitability of their operations in the face of challenging market conditions.
The export quota, set at 10.6 MMT, will be implemented from mid-February and will remain in effect until the conclusion of the current season, according to SovEcon.
While there is a possibility of an upward revision to the quota if export prices experience an increase, such a change is not anticipated at this point in time, the agricultural consultancy said.
Meanwhile, the US Department of Agriculture’s January forecast for Russian wheat exports was lowered by 1 MMT to 46 MMT.
While this figure is still exceptionally high, we anticipate it will decrease over time. This decrease will likely coincide with increased export estimates for the US and Argentina, SovEcon said.
Andrey Sizov, managing director at SovEcon, said:
A decline in Russian wheat export activity is expected to provide support to the global wheat market, tightening supply at a time when global balance sheets remain fragile.
The post SovEcon lowers Russian wheat export forecast amid slow shipments and poor margins appeared first on Invezz
