Wheat School: Railways, Russia, and wheat markets in 2018

When trying to explain why wheat prices are where they are, there are some concerns with dryness and protein levels affecting regional bids, but there is one dominant factor that’s underlying the entire market: Russia and its bumper crops.

World wheat carryout has grown by over 20 percent in the last three years, with Russia accounting for much of that increase.

This year alone, Russia’s wheat exports year-to-date are up 23 percent from last year, thanks in part to friendly shipping weather and rail capacity keeping up this winter, explains Marlene Boersch of Mercantile Consulting Venture in this market outlook Wheat School episode.

“We have increasing trouble competing in world markets because Black Sea exports are relatively cheap, their waterways are short, and their port costs are lower than ours,” she says.

In total, Russian wheat exports are expected to reach a record 45 million tonnes in 2017-18, limited only by port and rail capacity. And that being said, grain handling infrastructure in Russia is also improving by leaps and bounds.

“You look at increases in port capacity and inland rail capacity in Russia, it’s something like five-fold over the last fifteen years and they plan to increase it further,” she says.

The focus through 2018 will remain on Russian supplies.

“They had extraordinarily good yields last year and I don’t think they’ll repeat that,” says Boersch. “That’s something to focus on as you look toward next year and which factors will change the market. That’s one that probably carries the most weight.”

What does this mean for the competitiveness of Canadian wheat, both for 2018 and in the long term? Could we see drought issues affect the North American wheat market again in 2018? Listen to Marlene Boersch’s comments from CropSphere in Saskatoon in this Wheat School video:

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