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Black Sea wheat crop not in trouble yet

U.S. winter wheat crop in far worse shape because of poor emergence, inadequate soil moisture and continued drought

It is too soon to be getting anxious about the Black Sea wheat crop, say a couple of analysts.

North American futures markets responded last week to reports of dry conditions harming crops in Russia and Ukraine.

SovEcon, a Russian agriculture consultancy firm, trimmed its Russian wheat harvest forecast slightly last week to 77 million tonnes from 78.2 million tonnes.

Radiant Solutions, a geospatial services business, issued a news release saying the region received some much-needed moisture earlier this month but the dry pattern has returned.

The dry conditions are expected to last at least a couple weeks and when combined with above-normal temperatures, it will set the crop back prior to harvest.

“Rainfall over the next 10 days is expected to average less than half of normal across nearly all of the winter wheat belt,” Don Keeney, senior agricultural meteorologist for Radiant Solutions, said in a May 22 news release.

“The drier pattern will allow moisture supplies to decline rapidly once again, which will build stress on winter wheat.”

Bruce Burnett, director of markets and weather with Glacier MarketsFarm, said it is too early to get worried about the fortunes of the Black Sea crop.

He distinctly recalls reading similar reports of dry conditions in Russia about the same time last year and farmers ended up harvesting a record crop.

Burnett said the U.S. winter wheat crop is in far worse shape because unlike in the Black Sea region the crop was suffering from poor emergence and inadequate soil moisture on top of drought.

He thinks the U.S. Department of Agriculture’s forecast of a 72 million tonne Russian wheat crop based on trend-line yields is realistic.

“In order to punch that number a lot lower you’re going to need to see some very poor growing conditions here through the end of June,” said Burnett.

Dave Reimann, market analyst with Cargill Canada, said conditions in the Black Sea are not ideal but his sources in the region say it is not too bad yet and that is backed up by the continued export business out of the region.

“We’re still seeing competitive offers coming out of the Black Sea. It kind of suggests to me that at this stage of the game they’re not concerned yet,” he said.

Reimann said the market is more sensitive about conditions in Western Canada. If there is no general rain in the region by mid-June, things could get very interesting.

“You can feel that one picking up already,” he said.

But large global supplies of the crop will likely prevent a true bull run barring a total disaster somewhere.

“Looking at spring wheat there’s probably in the short-term some upside potential of something in the area of 20 cents or so and then there’s some pretty serious chart resistance at that point,” said Reimann.

In a recent newsletter, U.S. Wheat Associates pointed out that the global-stocks-to-use ratio excluding China is expected to be 20 percent by the end of 2018-19, the lowest level since 2007-08.

But Burnett said that is still 126 million tonnes of wheat, which isn’t exactly tight.

“Is it tight enough to warrant a huge price increase here? No,” he said.

“I can see the market rallying a bit but the upside is limited just because of the stocks situation.”

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