Russia’s Wheat Export Quota, Tax Could Squeeze US Grain Stocks

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In an effort to steady domestic grain prices, the Russian government announced measures that are expected to reduce wheat exports, a move that would likely shift demand to the United States. 

Two Russian measures were announced:

An export quota, first discussed in November, would limit exports of grains (including wheat, corn, rye, and barley) to 17.5 million tonnes between Feb. 15 and June 30 2021.

An export tax on wheat of 25 euros/tonne (30.32 USD/tonne) in effect during the same period. 

Reduced exports from one of the world’s largest wheat exporters would increase pressure on US grain stocks. An additional 3 million tonnes of US wheat demand could push US ending stocks, as of May 2021, to their lowest level since 2014/15, when producer prices for wheat were 6 USD/bushel. The USDA recently estimated average producer wheat prices for the current year would be 4.70 USD/bushel.  

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The USDA estimates Russia will ship 40 million tonnes of wheat for the full 2020/21 marketing year that started on July 1. The new measures, which come as Russia battles rising domestic food inflation, may push the USDA to reduce its estimate. Still, Russia’s wheat exports look to be higher than last year, even with limits imposed. The just announced 17.5 million-tonne quota for the February-June 2021 period is well above Russia’s grain exports in the same period of 2020, which came to about 13.5 million tonnes. In addition, Russian wheat exports may have been front-loaded for December and January in anticipation of the quota. 

Click here to view Gro's Black Sea Winter Wheat Yield Models

CBOT wheat prices are down on Monday in response to the Russian announcement, as the government intervention was in line with market expectations. Still, the USDA’s December WASDE report, released last week, provided additional support to wheat prices with increases in global feed wheat demand. The USDA raised its estimate of Chinese domestic wheat feed use to 24 million tonnes in 2020/21, the highest since 1995/96. China continues to be an avid buyer of wheat worldwide. High corn prices have driven a global shift to cheaper alternative feedstocks, and wheat has risen as a result.

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.

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