There has been a turnaround in the fortunes of Russia’s winter grain crops, but lingering problems continue, says a grain analyst.
“Earlier in the season it looked like a major weather related story for Russia,” said Neil Townsend, director of CWB Market Research.
“There still may be a story, but it’s not as big of a threat as it was.”
Grain production estimates are all over the map, ranging from a low of 70 million tonnes to the Russian government assertion that it will be a 100 million tonne crop, which would be close to last year’s record 104 million tonnes.
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“The truth is probably somewhere in the middle,” said Townsend.
He is forecasting 82 million tonnes of wheat, corn and barley production. His wheat estimate is down 10 million tonnes from last year, while barley is down two million tonnes and corn production is expected to be flat.
That is in line with an estimate by SovEcon calling for 85 to 92 million tonnes of total Russian grain production this year.
SovEcon is forecasting 47 to 53 million tonnes of wheat, down from 59 million tonnes last year. It expects 13 to 17 million tonnes of wheat exports in 2015-16, which is considerably below the 21 million tonnes expected to be shipped out this year.
Townsend said winterkill is at the high end of the normal range because of a dry fall and an early cold snap, but crop conditions have improved.
Traders are not panicking about the state of the winter wheat crop based on some of the market signals coming out of Russia.
“They’re still selling wheat this year, which a lot of people didn’t expect them to do,” he said.
Exporters have also been selling plenty of new crop wheat at low prices.
“They wouldn’t be selling quite as aggressively if they didn’t think they had some sort of crop coming,” said Townsend.
He believes Ukraine’s grain crop is faring better than Russia’s. CWB is forecasting a two million tonne decline in wheat and no change in corn compared to last year. SovEcon is more pessimistic, forecasting a 10 million tonne reduction in total Ukrainian grain production, largely because of a faltering corn crop.
SovEcon is predicting 10 to 13 million tonnes of corn exports from the Black Sea region, way down from 21 million tonnes in 2014-15.
Townsend isn’t buying the idea that growers in Russia and Ukraine will be cutting back on spring plantings because of faltering currencies and a lack of financing.
There are reports that it will cost Russian farmers up to 60 percent more to seed a wheat crop because their seed, pesticides and other inputs are largely imported.
However, Townsend said farmers in Russia and Ukraine are benefiting from record grain prices because of the currency issue.
“They’ve got to plant something. I’d be surprised if any acres are missed in Russia or Ukraine,” he said.
An argument can be made that growers will plant more barley than corn because corn seed has to be imported. However, the counterargument is that farmers want to grow an exportable commodity such as corn to take advantage of the currency issue.
Townsend said soil moisture profiles are excellent for planting spring crops. Forty percent of Russia’s wheat is spring wheat, while a small portion of Ukraine’s wheat is planted in spring.
Almost all of Kazakhstan’s wheat is spring planted, but the country has difficulty exporting the crop because of logistical problems. As a result, it mills the wheat and exports the flour.
