MOSCOW – Russia’s second consecutive bumper wheat harvest is reinforcing its position as the No. 1 exporter, but it is also easing price pressures stemming from Moscow’s invasion of Ukraine.
The Kremlin’s war – including blockading and bombarding ports – has hobbled Ukraine’s food exports, helping cement Russia’s domination of the global wheat market.
That is reflected in record Russian shipments, as the nation’s traders overcome the financing and logistical challenges some faced in the aftermath of the invasion in February 2022.
However, Russia’s overflowing grain ports have also yielded a silver lining for wheat consumers buffeted by a cost-of-living crisis: the lowest prices in almost three years.
Despite the Kremlin’s efforts to exploit the situation – by shoring up wheat prices to replenish its own coffers – the Chicago market is trading at less than half the peak reached after Moscow first invaded.
“There are not a lot of competitors for Russian wheat,” said Ms Hélène Duflot, a grain-market analyst at Strategie Grains. “Russia is the price maker at the moment.”
With the supply glut depressing prices, Russia is trying to use its dominant position to put a floor under the market in a bid to set the lowest legal price for wheat.
Not only would that placate its own farmers, upset by dwindling incomes, but would also boost the Kremlin’s war-strained coffers by generating additional tax revenues.
Russian officials have been trying to enforce an informal price floor for exports, according to people familiar with the matter. That’s forcing some traders to renegotiate or even cancel deals, the people said, asking not be identified as the matter is private.
The government can enforce the price floor by refusing to grant export documents to lower-cost shipments, the people said. Still, the application of the floor has been inconsistent.
This month Egypt booked a massive quantity of Russian wheat in a private deal at a price below the unofficial floor in public tenders.
Several days later, Egypt said the trader would be allowed to supply grain from origins other than Russia. That allows the Russian agriculture ministry to “save face” on deals that fall below its price floor, according to Andrey Sizov, managing director at research firm SovEcon.
“If they don’t necessarily sell Russian wheat, it implies they haven’t violated the Russian price floor,” Mr Sizov said.
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