Russian wheat outlook dismal

Less than half of normal rain | Output of
 winter wheat could drop by five million tonnes

Russia’s winter wheat crop is in trouble, according to a Russian market research and consulting firm, reviving memories of conditions that eventually led to the severe 2010 Russian drought.

Dry conditions have dashed winter wheat yield prospects in the crop, which will be harvested next year.

SovEcon has not issued an official forecast for 2015-16 wheat production, but director Andrey Sizov’s personal estimate is for 50 to 55 million tonnes of wheat, down from 59 million tonnes this year.

Production could fall well below 50 million tonnes if there is a lack of snow this winter and colder-than-normal temperatures, he said.

A dismal Russian wheat crop of 41.5 million tonnes in 2010-11 led to an export ban, which in conjunction with tight U.S. corn stocks and an El Nino that limited rain in South America helped send spring wheat prices skyrocketing to more than $10 per bushel in early 2011.

Sizov said much-needed rain in recent weeks has led to an improvement in crop conditions in southern Russia, which is the top exporting region.

However, he remains concerned about the central black earth regions because of a recent cold snap that has brought -12 C temperatures to an area that has no snow cover.

Overall, crop conditions are worse than average for this time of year.

“Wheat exports may drop to 15 to 20 million tonnes from 23 to 24 million tonnes in 2014-15, but currently I don’t think that it will be enough to significantly boost world market prices,” he said in an email.

Dale Mohler, a senior meteorologist specializing in commodity forecasting with AccuWeather, said it has been exceptionally dry in the upper and middle portions of Russia’s Volga region.

Volgograd has received 74 milli-metres of precipitation since June 1, well below the usual 160 mm.

“That’s less than half of normal. That’s pretty significant,” he said.

As well, there doesn’t appear to be much reprieve on the horizon.

“Over the next three to four months, I don’t think things are going to improve. If anything, they might get worse or they could get a lot worse.”

Russia could be in for some colder-than-normal weather this winter because of a system forming over Siberia.

“That’s a bit of a concern. With the lack of precipitation, there’s less snow cover or maybe no snow cover to protect (the wheat) against the winter cold,” he said.

Ukraine’s winter wheat crop is in better condition. The central and western portions of the wheat growing region have had adequate moisture. It is only dry in the northeast.

The country’s agriculture ministry estimates that 11 percent, or 2.12 million acres of winter grain crops, is likely to be re-seeded next spring, which is fairly typical.

Richard Warburton, chief executive officer of Black Earth Farming, which owns 627,000 acres of Russian farmland, echoed Sizov’s concerns about Russia’s winter crop condition.

“It is exceptionally dry in our regions and that has affected our wheat crops,” he said during a recent conference call with investment analysts to discuss the firm’s third quarter results.

“It has had a big impact on most of the wheat crops in the central region.”

Warburton estimated that 10 percent of the company’s 103,000 acres of winter wheat are at risk.

Rainfall on the company’s farm in the Lipetsk oblast is below 2010 levels and substantially below the seven-year average.

“We’ve had almost no rain since June and 70 percent of our hectarage now sits with a cumulative rainfall below 2010 levels,” he said.

Sizov said another yield-limiting factor is the weakness of the Russian currency, which has made crop inputs more expensive.

“We are likely to see a decrease of overall rate of application and/or switching to cheaper inputs,” he said.

Sizov anticipate growers will switch from brand name chemicals to cheaper Chinese generics.

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