Dry conditions in southern Russia are leading to huge production forecast discrepancies for the world’s largest wheat exporter.
The Institute for Agricultural Market Studies (IKAR), a Russian agricultural consultancy, is forecasting a 2020-21 Russian crop of 77.4 million tonnes, which would be a few million tonnes larger than last year.
SovEcon, a competing Russian agricultural consultancy, is sticking with its forecast of 84.4 million tonnes, which would approach the record set in 2017-18.
The difference between the two estimates is a whopping seven million tonnes, which could have significant market implications depending on who is right.
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Wheat futures were sharply higher at the start of this week, based on concerns about the 2020-21 Black Sea wheat crop and limits on Russian exports of the 2019-20 crop.
It has been dry in southern Russia all winter and now into spring. It is a region where 43 percent of the country’s winter wheat crop is grown. Another 18 percent is typically planted in the north Caucasus, which is another dry area.
Central and northern Russia are in far better shape.
Andrey Sizov, managing director of SovEcon, is watching southern Russia with “growing concern.”
Moisture reserves are at their lowest levels in recent years and need to get back to normal by mid-May at the latest.
The region received a shot of rain last week but it wasn’t enough for many key wheat-growing regions.
“In reality, the region still remains dry,” he said in a recent video tweet.
If rain fails to materialize in the coming weeks yield potential could “suffer badly.” That would force him to revisit his 84.4 million tonne Russian wheat forecast.
“If rains in the next weeks remain below normal this could be cut and cut significantly,” said Sizov.
Drew Lerner, president of World Weather Inc., said the area of concern extends well beyond southern Russia into southern Ukraine, Kazakhstan and Romania.
The good news is that it has been relatively cool in most of the affected regions. But that is about to change.
Temperatures are expected to be in the high teens to low 20 C range over the next couple of weeks, which will accelerate drying and greatly expand the area of crop stress.
Lerner anticipates that the moisture stress level will be pretty high by the end of the first week of May.
However, there could be some relief in the middle two-weeks of May in the form of sporadic and erratic rainfall.
“Everybody is going to get some moisture period in May but it’s probably not going to be large enough volumes to fix the moisture deficits that go way back,” he said.
The bottom line is there likely won’t be enough rain to alleviate the mounting concerns about the condition of the Black Sea wheat crop.
“This area that we’re talking about may still be limping,” said Lerner. “I’m not of the opinion that we’re necessarily going to see a big fix this season.”
Bruce Burnett, analyst with MarketsFarm, said the situation is worth monitoring but he isn’t pulling out his world supply and demand eraser just yet.
“They definitely need rain in Russia and Ukraine but you can say that every year at this time of year,” he said.
At this early stage it is hard to forecast any yield reduction but he agreed with Sizov that the coming weeks will be important. If it hasn’t rained by mid-May it could spell trouble.
“We’re getting to that point in time where it’s critical, especially some of the southern parts of the Russian growing area,” said Burnett.
He noted that moisture deficits in Russian districts like Rostov and Krasnodar are substantial and won’t be eliminated with one good rainfall.
