The weather has not co-operated for Russia’s wheat growers and the country might produce the smallest crop since 2021.
Killer frosts, drought and excess moisture in various regions of Russia have trimmed yield prospects.
The winter wheat crop in dry southern regions near the Black Sea are in the filling stage while spring wheat seeding in Siberia, the largest producer of that variety, is well behind the normal pace because of cool ,wet weather.
Sovecon, the private forecaster, cited these factors last week when it lowered its production outlook to 80.7 million tonnes from 82.1 million previously.
“With the current hot and dry conditions in the winter wheat regions and excessive rain in Siberia, we are not sure that we won’t go lower than 80 million tonnes,” Sovecon managing director Andrey Sizov said in an email.
That is substantially lower than the 88 million tonnes that the United States Department of Agriculture forecast in its May report. Sovecon’s forecasts are often higher than the USDA’s so it’s notable how much lower its outlook is this year.
Russia had a recent run of huge crops, allowing it to increase its dominance in the world export market. In the five years from 2017 to 2021, its average wheat production was 78.2 million tonnes, according to USDA figures, but that jumped to 92 million in 2022 (Sovecon’s estimate was even higher at a staggering 104 million) and 91.5 million in 2023 (Sovecon pegged it at 93 million.)
These last two huge crops allowed Russia to export more than 50 million tonnes a year. That is about twice as much as Canada exports.
With such a vast amount to export, Russia could access markets normally served by others, including Mexico, Indonesia and Vietnam, Reuters reported. Huge Russian exports helped push global wheat prices down after they soared in early 2022 when Russia invaded Ukraine.
But exports will likely be less in 2024-25.
A board member of Russian agricultural lender VTB told an international economic forum that the country would likely export about 60 million tonnes of grain, down 10 million from 2023-24, according to a Reuters news story. That is mostly wheat but also includes barley and corn exports.
The dry weather in southern Russia extends into Ukraine. Ukraine expects a crop of 19.1 million tonnes of wheat, according to its grain association. That would be down from 22 million last year and the lowest in over a decade. The USDA’s May report forecast the crop at 21 million tonnes.
Wheat prices bottomed in early April but enjoyed a rally late in the month and through May as news about Russia’s frost and drought circulated.
But futures markets fell this month, on showers in dry parts of Russia and generally good wheat conditions in North America.
An industry tour of American hard red winter wheat in mid-May, mostly in Kansas, showed potential for a yield of 46.5 bushels per acre, significantly higher than the USDA’s forecast for 38 bu. per acre.
Meanwhile, seeding and emergence of the U.S. spring wheat crop is ahead of normal and the crop condition is good.
Wheat seeding in Canada was a little late but is now mostly in the ground and benefiting from a much improved moisture profile thanks to above normal rainfall since April 1. Dry weather lingers in the Peace River region, especially around Fort St. John, B.C.
On the demand side of market, the trade is looking for clarity on speculation that India might drop its import tax on wheat.
India’s statistics body says its wheat crop gets a little larger each year to post new records, but private analysts say totals are smaller than the official number. At any rate, they lag demand that is also growing to new records.
The government dipped into stores to keep prices affordable and its stocks are now inadequate.
To get more wheat imported, the government would have to drop its 40 percent tariff.
There is speculation that if it did, private importers would bring in two to five million tonnes, likely of Russian wheat. That would be significant because India rarely imports these days.
Even though food price inflation is running at more than eight per cent year over year, Prime Minister Narendra Modi was reluctant to act on the tariff during the country’s election because it could upset farmers, a significant voting block.
The vote is now over and his party won again, but has been reduced to a minority and will have to form a coalition government.
It appears the government will now drop for the tariff for a few months.
The expected imports likely won’t set the world market afire, but with a smaller crop and increased exports to India, Russia’s supply will be less price-depressing this coming year.
Source: The Western Producer