Russia will have plenty of wheat to export despite reports of a heat wave damaging production prospects in the winter wheat area, say analysts.
Neil Townsend, director of CWB Market Research, is forecasting 57.6 million tonnes of wheat production, which while smaller than last year’s harvest would still be the fourth largest crop in recent history.
There have been reports that Russia’s winter wheat prospects were shriveling in a heat wave.
Karen Braun, an analyst with Lanworth who recently toured Russian wheat fields, tweeted that losses in southern Volgograd could exceed 50 percent.
But Townsend said the dry areas comprise maybe 10 to 15 percent of the winter wheat crop and some of those areas recently got rain.
He is forecasting a record 21.85 million tonnes of Russian wheat exports.
“(Farmers) are strongly, strongly incentivized by their foreign ex-change to be exporting because access to hard currency is desirable,” said Townsend.
Dan Basse, president of Ag-Resource Company, agreed that Russian farmers are poised to harvest a huge crop.
“People we trust and deal with over there are saying that the minimum the Russian wheat crop will be is 54 (million tonnes) and with good weather we could still make it up to 58,” he said.
That would be well above the U.S. Department of Agriculture’s forecast of 53.5 million tonnes. SovEcon, a leading Russian agriculture consultant, recently upgraded its forecast to 57 million tonnes from 54 million tonnes.
Basse believes Russia will export a record 23 to 25 million tonnes of wheat.
Growers will be in a hurry to market the crop straight off the combine worrying that the government might decide again to limit exports to ensure the domestic market gets enough grain.
Townsend said there is no incentive for Russian farmers to hold onto the crop because wheat is showing no signs of gathering any price momentum.
“Even with this price rally in the futures (last) week their prices have barely budged on the FOB price,” he said.
There has also been a dramatic improvement in the fortunes of Ukraine’s wheat crop, which earlier in the year was looking pretty bad.
“It has improved quite a bit,” said Townsend.
He is forecasting 22.8 million tonnes of production, which would be the third largest harvest since 1990. Yields would have been better if farmers hadn’t scrimped on chemical and fertilizer inputs due to a sagging economy.
Townsend is forecasting 10.8 million tonnes of exports, the third largest export program in recent history.
“They could export more,” he said.
“That leaves them with over five million tonnes of carryout. Really they can get by with 2.5 or three million tonnes.”
Basse expects Black Sea wheat prices to set a seasonal low of about $175 US per tonne down from $189 per tonne due to harvest pressure and then it will recover after the initial onslaught of grain deliveries.
He believes there is already about 1.5 million tonnes of wheat in exportable position that will move quickly once the first new crop deliveries arrive.
Basse thinks Russia’s new export tax will not curtail shipments be-cause it amounts only to about $1 per tonne and that cost is passed down the chain to producers rather than up the chain to end users.