Market Morsel: Russian wheat crashes out
Market Morsel
SovEcon, the leading Black Sea agricultural markets research firm, cut Russia’s wheat crop forecast from 82.3 mmt to 76.4 mmt.
The main reason is the substantially smaller winter wheat area reported by Rosstat on Friday. The statistical state agency reported it at 15.6 mln ha (SovEcon estimate: 16.8 mln ha), spring wheat area number was 13.1 mln ha (13.1 mln ha). The smaller area accounted for around 4 mmt of 5.9 mmt revision.
An additional factor was hot and dry weather in July which negatively affected spring wheat yield potential and in some cases winter wheat. Winter wheat yields are below expectations in the Center and the Volga Valley. Outlook for spring wheat yield in the Volga Valley has worsened, especially in the eastern part of the region where moisture reserves were the lowest in a decade.
USDA estimates the Russian wheat crop at 85 mmt (ex. Crimea which will produce around 0.7-0.8 mmt).
Typically, the market underestimates Russia’s winter wheat area. This year’s not the case – despite mild winter winter-kill was above all expectations resulting in an unexpectedly small pre-harvest winter wheat area.
Worsening wheat crop outlook for Russia (#1 world exporter) and Canada (#3/4) suffering from drought could be not fully reflected in global wheat prices at the moment
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