Miller Magazine Issue 108 / December 2018

RUSSIA 87 MILLER / DECEMBER 2018 Russia could squeeze the US wheat at Iraqi market After two years of unsuccessful negotiations, new Iraqi Trade Minister Mohammed Hashim al-Aani could sup- port the allowance of Russian origin wheat imports in its state buying tenders and Iraqi delegation could be send to Russia in December. Iraq has an import gap of around 2 MMT a year, which is covered traditionally with the US, Australian and Canadian origins. Currently, the main qu- estion is the nature of gluten content in Russian wheat, although, price issue could prevail, as Russian wheat is about $10-12/MT cheaper vs. U.S. HRW wheat shipped to the Middle East, Reuters cited one trader. Plus, Rus- sia increased exports to Nigeria, as well cutting US share there. Russia’s negotiations with Algeria annoying French exporters In October, the Rosselkhoznadzor discussed with the members of the Algerian delegation the issue of import of Russian wheat. The parties agreed to supply a pilot batch of grain to Algeria for a study, after which a final decision is made. Thus, Algeria might amend OAIC’s ter- ms to allow 0.5% bug damage soon from current 0%. Reuters noted, that FranceAgriMer considers, Russian wheat is not expected to enter the Algerian market this season. If Algeria maintained its import terms, Russia would have to invest in sorting processes to meet the requirements. Meanwhile, France to send grain export delegation to Algeria early next year. Russian wheat expansion to Saudi Arabia could affect sales from Germany, Poland and the Baltic States Same as Algeria, Saudi Arabia might amend SAGO’s zero bug damage to 0.5% too from current 0%. Russia is preparing to send wheat samples to Saudi Arabia for quality tests. Such development could hurt wheat export from Germany, Poland and the Baltic States. Russian wheat flower: inner market is enough Unlike wheat, Russian wheat flour industry is focused on inner sales. The country produces about 9 MMT of wheat flour per year, which is almost totally consumed locally. Annual export of wheat flour from Russia is about 200-350 KMT, leaving it on the outskirts of the list of world wheat flour exporters. Traditionally, China is a major buyer of Russian flour. However, shipments to the country dropped to 13 KMT in Jul-Sep 2018/19 vs. about 30 KMT at the same time last year. Hong Kong imported over 9.9 KMT of flour in Jul-Sep 2018/19 against about 4 KMT in the whole 2017-18 MY. In November, world wheat flour trade 2018/19 was forecast by the IGC in line with last year’s 17.1 MMT. Iraq is forecast to increase wheat flour imports 2018/19 by 150 KMT y/y to record 2.85 MMT. Afghanistan is also forecast to increase imports by 100 KMT y/y to 3.1 MMT due to a drought-affected wheat harvest. In spite of Tur- key, #1 world flour exporter, is dealing with a currency crisis, the IGC forecasts the country’s exports to increase slightly from a year ago, to 5 MMT from 4.9 MMT. Russia on the way to #2 record wheat crop in 2019 As in late September - early October rains finally stop- ped in Siberia, and farmers caught up harvesting delays, SovEcon gradually increased its estimate of 2018/19 Rus- sian all grains crop to 110.2 MMT, incl. 70.7 MMT of wheat (#3 highest in Russia’s history), 9.9 MMT of corn and 16.8 MMT of barley. As for 2019 figures, at the end of November, Reuters noted, that SovEcon forecast Russian wheat crop 2019 to reach #2 highest volume on record of 77.3 MMT (incl. Crimea’s approximate 0.5 MMT), in case of no natural disasters and average yield of 2.8 MT/HA vs. about 2.6 MT/HA in 2018/19. Russian winter crops planting campaign 2019 was completed at a record pace. High prices pushed farmers to expand winter grain crops plantings to a record of 18.2– 18.3 MLN HA vs. 17.8 MLN HA a year earlier with expan- sion especially in the Volga and Central Federal District. Source: Atria Brokers based on Russian AgMin figu- res as of Nov 2018. Map. Russian wheat producing areas 2018/19, KHA There is some lack of moisture for crops development, although “conditions are dry, but not catastrophic”, no- ted SovEcon.