LONDON (Reuters) — Dry weather in some wheat-growing belts of Russia and the impact of a political and economic crisis in Ukraine have raised some uncertainty about Black Sea grain supply in the run-up to this summer’s harvest, analysts and traders said on Tuesday.
Forecasters have been projecting big grain crops for both countries that should allow them to continue exporting heavily in the upcoming 2014-15 season, a view that has contributed to a slide in international prices in the past month.
But Russia’s Institute for Agricultural Market Studies has cut its outlook for the Russian grain harvest to 93.5 million tonnes from 96 million tonnes previously after factoring in conditions observed on a crop tour in the past few days, IKAR’s head Dmitry Rylko said.
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Dry weather in the central and Volga regions was the main reason for the downward revision, which included a cut to IKAR’s wheat crop forecast to 53 million tonnes from 54.5 million previously, he said on the sidelines of the International Grains Council’s annual conference.
“It will depend on the rains in the next few days,” he said of the risk to Russian grain crops.
In Russia’s key southern export belt, IKAR is estimating a wheat crop of 21.2 to 21.5 million tonnes, he said.
U.S. satellite-based forecaster MDA Cropcast last week cut its Russian wheat crop outlook to 45 million tonnes from 51.6 million previously and was also waiting to see whether forecast rain would reach dry zones, MDA’s Don Keeney said.
“I will be revising it (the wheat estimate) upward slightly if they do get the rains that are currently forecast later this week,” he said by email.
MDA’s sharp cut last week to its Russian wheat outlook to take account both of current dryness and signs of a dry summer that may suggest similarities with low production years like 2010 and 2012, he said.
Crop weather has been more favourable in Ukraine and has led some forecasters to anticipate overall grain output will surpass last year’s record volume.
IKAR also expects a large Ukrainian grain harvest, although it could be affected by a one-third drop in fertilizer volumes linked to the financial difficulties of farmers.
“We will judge by the end of the season how this will affect quality and quantity,” Rylko said in an earlier presentation.
Political risks to grain trade, in relation to unrest in Ukraine and related tensions with Russia, were much less significant than two or three months ago, he said.
If there were disruption to Kerch, the trans-shipping port in the Crimea region annexed by Russia and claimed by Kiev, exporters could switch to Kavkaz on other side of the Kerch strait, he said.
Kerch has been the single-biggest shipping outlet for Russian grain exports this season, he noted, citing higher costs at deep-sea ports due to strict controls on inbound truck loads.
Traders agreed exporters would find ways to cope with the consequences of the crisis but said it could make the start of the 2014-15 export season more erratic, with farmers torn between selling crop to get cash and holding on to grain as a hedge against currency devaluation.
“There is a tinge of risk,” one trade source said. “There are expectations that there is going to be a lot of grain but can it be delivered?”
