In the first ten months of 2023, the profitability of buckwheat production in Russia fell to 30.4%, a stark contrast to the 76.8% profitability recorded in 2022. This downturn is attributed to a sharp decrease in domestic prices and an unprecedented increase in production volumes.
Key Factors Affecting Profitability
- Plummeting Prices: The average selling price for buckwheat from January to November 2023 was 19,745 rubles per ton, excluding VAT. This figure represents a 49% decline compared to the same period in 2022. The steep drop in prices is primarily due to an oversupply in the market.
- Record Harvest: Russia achieved a record buckwheat harvest in 2023. As of November 27, 96% of the buckwheat-planted areas were harvested, yielding 1.576 million tons, which is 358.8 thousand tons more than in 2022. This bumper crop has contributed to the excess supply and subsequent price drop.
- High Stock Levels: By the end of 2022, the stock of buckwheat in storage and processing organizations stood at 131.2 thousand tons, marking a 33.5% increase over 2021. With an average domestic consumption of 850 thousand tons, the large inventory has exacerbated the drop in prices.
- Historical Context: The 2023 harvest ranks among the highest in Russia’s history. For comparison, in 2022, Russia produced 1.22 million tons of buckwheat, while 2021 saw 919 thousand tons and 2019 recorded 786 thousand tons.
Market Dynamics and Implications
The buckwheat market is facing a classic case of supply outstripping demand. The record production levels have created a surplus, driving prices down and impacting profitability. Despite high production volumes, farmers and producers are struggling with lower profit margins.
Russia’s buckwheat industry is navigating a challenging period marked by a record harvest and declining profitability. While the high yield showcases the sector’s productivity, the oversupply has led to significant price reductions. For the industry to stabilize, market adjustments or increased domestic consumption may be necessary to balance supply and demand.
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