On March 19, the Turkish government lifted restrictions on wheat imports by introducing duty‑free access under the Domestic Processing Regime (DIR). Until now, Turkish flour mills were required to source 75% of their wheat needs from state stocks (managed by the Turkish Grain Board, TMO) and could import only 25%.
Under the new rules, millers may import the full amount they require provided they subsequently export an equivalent quantity of flour. This policy aims to restore Turkey’s historical position as a major global flour exporter; however, market data for the MY 2024/25 shows that flour exports have contracted by 41% compared to the previous season (from 2.45 to 1.44 million tons).Key market reactions include:
- A modest but notable rise in wheat prices in Ukrainian Black Sea ports (by approximately $5–6 per ton, now trading in the $235–238/ Per M/T range).
- A shift in the source of high‐protein wheat toward the Russian Federation, as Turkey’s new policy is expected to trigger re‑exports from Russian wheat already stored in bonded warehouses.
- Analysts from Russia forecast that Turkey will import around 1.5 million tons of wheat between March and June 2025, contributing to an overall import target of about 4 million tons for the marketing year, with a heavy reliance (approximately 3.8 million tons) on Russian supplies—down sharply from 8.2 million tons last season.
At the same time, a reduction in corn duties has further altered food wheat prices and market sentiment, creating a complex interplay between domestic policy, trade flows, and global supply–demand fundamentals.
Turkish Policy Reform: Rationale and Immediate Impacts
- Duty‑Free Imports The government’s decision to allow duty‑free wheat imports represents a reversal of earlier restrictions that forced flour mills to rely predominantly on TMO stocks. Millers must now back their imported wheat by exporting an equivalent amount of flour.
- Export Objectives Turkey is aiming to regain its status as a global flour exporter. Historically a leader in this segment, Turkey’s market share was compromised by restrictive import measures that coincided with a 41% drop in flour exports for MY 2024/25.
- Complementary Corn Duty Reduction Alongside wheat, the reduction in corn import duties has contributed to an overall tightening in food wheat price levels at key trading hubs in the Ukrainian Black Sea region.
- Price Adjustments Wheat prices have responded modestly—with futures for soft winter (SRW) wheat in Chicago and wheat on the Euronext exchange in Paris declining slightly—yet the spike in prices at Black Sea ports reflects a regional tightening of supply conditions.
- Supply Sources Shift The policy change is expected to primarily activate supplies of high‑protein wheat from Russia. However, the available volumes will largely come from wheat already held in Turkish bonded warehouses (imported prior to February 15 when supply restrictions on Russian wheat began), and this stock will be gradually consumed as Turkey gears up for its own harvest starting in June.
Global Trade Flows and the Role of Russian Wheat
- Russian Wheat Imports Analysts expect that, due to the new Turkish rules, millers will favor wheat from Russia. Forecasts suggest that Turkey may import about 1.5 million tons from March to June 2025, and total wheat imports for the marketing year could reach 4 million tons (with roughly 3.8 million tons coming from Russia). This is a significant contraction from the 8.2 million tons imported in the previous MY.
- Storage and Re‑Export Dynamics Because a large volume of Russian wheat already occupies Turkish warehouses, the new policy effectively “recycles” existing stock rather than driving a surge in new imports.
- High‑Protein Wheat Prices Recent trades indicate that prices for Russian wheat (with protein levels around 12.5% and above) are being supported by demand from key buyers. For example, Iran’s State Trading Company recently acquired at least 250,000 tons of Russian wheat at a premium price of approximately $338.6 per M/T C&F. Such transactions are adding a further price floor to Russian wheat in the global market.
Price Dynamics and Market Sentiment
- Black Sea Hub The lifting of import restrictions and concurrent corn duty reductions have increased the demand for wheat, driving prices in Ukrainian Black Sea ports upward by about $5–6 per M/T
- Futures Market Despite these regional shifts, major wheat futures (such as Chicago SRW and Euronext wheat contracts) have shown relatively muted movements, indicating that while short‑term price volatility exists, the overall market balance is being influenced by longer‑term supply factors.
- Production Update The International Grains Council has recently revised the world wheat production forecast upward by 2 million tons, now at approximately 799 million tons for the MY 2024/25.
- Stocks Global ending stocks are estimated to have risen by about 1 million tons, reaching 265 million tons. These adjustments, however, do little to offset the pressure induced by re‑export dynamics and shifting import policies in major consuming markets.
Global Supply–Demand Fundamentals and Outlook
- Harvest and Storage Turkey’s own wheat harvest will resume in June, which is expected to gradually ease its reliance on imports. However, the immediate need for wheat in the milling sector is being met largely through Russian stocks.
- Weather and Production Risks Adverse weather conditions across key producing region such as drying in southern Russia, frosts in Australia, and drought conditions in Argentin add uncertainty to future supply levels. For instance, Russian forecasts indicate a lower yield in some regions due to recent unfavorable weather, although there is cautious optimism if mid‑October rains materialize.
- Flour Export Ambitions Turkey’s renewed drive to re‑enter global flour markets is expected to boost demand for high‑protein wheat, thereby reinforcing trade flows from Russia.
- Competitive Shifts Meanwhile, buyers in other markets (for example, Iran and some Middle Eastern countries) are increasingly turning to Russian wheat, further influencing the global price structure.
- Impact on Futures Although futures markets have been only modestly affected so far, the rebalancing of trade flows and potential adjustments in global stocks are likely to shape price trends over the remainder of the marketing year.
Risks and Uncertainties
- Policy Continuity The success of the new Turkish import regime depends on whether it can sustainably supply the milling sector without overburdening millers with re‑export obligations.
- Geopolitical and Trade Sanctions Ongoing EU sanctions on vessels transporting Russian grain and broader Western trade restrictions remain potential risks that could further constrain Russian export volumes.
- Weather Volatility Uncertain weather conditions across major wheat-growing regions globally remain a perennial risk to both production and supply consistency.
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