Russia's wheat harvest may have been high on quantity but it is scoring relatively low on quality, Black Earth Farming said, in results which illustrated some of the challenges facing farm operators in the country, and sent its shares tumbling.
The group, which controls 256,000 hectares of Russian farmland, highlighted the size of the country's grains harvest this year - at 101,000 tonnes the first biggest since Soviet times, of which 61,000 tonnes is wheat.
However, wheat quality "is generally lower this year, with low gluten levels and average protein levels at around 12%, versus the 12.5% typical for the region," and contained in the benchmark export grade.
"As a result there is a bigger-than-average share of feed category in the [Russian] wheat crop," Black Earth Farming said.
With Russia expanding its livestock industry, in the face of curbs on imports which have sent domestic meat prices soaring, significant supplies of feed may find ready buyers domestically.
However, it would make it more tricky to find milling wheat importers, with many requiring 12.5% or more protein – one exception being Egypt's Gasc grain authority which has a 12% hurdle for Russian supplies.
Russian merchants have scored particularly highly in tenders by Gasc in 2015-16, accounting for more than 1.5m tonnes of the 2.6m tonnes the authority has purchased so far.
Russian wheat exports have also turned up in unusual destinations, such as the UK, which imported 10,988 tonnes in September – more in one month than in the previous seven seasons combined.
The comments come as wheat quality has come under the spotlight in Australia too, another major exporter, thanks to harvest-time rains, which can encourage sprouting and dent protein levels when falling on ripe grains.
However, in the US, it is higher protein wheat which is in relative abundance, provoking an unusually large premium of Chicago soft red winter wheat futures to Kansas City-traded hard red winter wheat, which usually itself is more expensive.
Meanwhile, prospects for Russia's 2016 wheat crop have also been in focus, with dry autumn conditions prompting some farmers to hold back on seedings and hampering establishment of what is planted.
Black Earth Farming, while saying the overall Russian winter wheat area is down 12% year on year, said that its own winter wheat crop, planted on 38,000 hectares, had fared well thanks to early sowings.
"All of our crops were seeded, emerged and established before dryness became a problem," said Richard Warburton, the Black Earth Farming chief executive, saying the crop was "in excellent condition".
However, the company, which is listed in Stockholm, found some of the other issues involved in operating in Russia more challenging, with a 52% drop in earnings to $2.38m in the July-to-September quarter down largely to the knock-on effects of the declining rouble.
"Weakening of the rouble against the Swedish krone during the quarter resulted in a foreign translation loss on the company's krone-denominated bonds of $8.2m," said the group, which in August took out its first ever rouble-denominated working capital credit facility to reduce exchange risk.
The group's operating profit for the quarter, at $11.3m, was up 9.1% year on year.
Black Earth Farming also revealed that rouble "volatility", combined with "uncertainty around" the wheat export levy which Russia introduced this year, had prompted it to curtail hedging of this year's crop such that 58% has been priced, compared with 72% at this time last year.
Because of the foreign exchange risk, "we're not locking in any rouble prices more than a few days in advance," Mr Warburton told investors.
Black Earth Farming shares closed down 8.7% at SEK3.37 in Stockholm.