COBANK: SMALLER RUSSIAN WHEAT CROP TO FUEL MARKET VOLATILITY
A smaller Russian wheat harvest and lower export capacity is expected to alert the world wheat market to the extreme global tightness that has been building in recent years, according to a new report from CoBank. Russia’s wheat crop is forecast to 9.3% smaller year-over-year than last year’s harvest, according to FAS. FAS predicts wheat exports declining 11.1% compared to last year to 48 million tonnes. More recently, the tightness in world wheat has been masked by several factors: harvest pressure in the US where production is up 3.5% year-over-year; ample US corn stocks; and Turkey’s recent ban on imported wheat from June 21 through mid-October.
With Turkey’s import ban in place, Russian wheat will leak into other foreign markets, pressuring local prices,” Ehmke said. Egypt has opted for Ukrainian and eastern European origin wheat in its latest two tenders. “Russian wheat offers were well above competing offers in both tenders, which is a rare occurrence.” With greater consolidation of the Russian grain trade, there will be less need for the government to use export bans or taxes to limit trade flows. Restrictions may simply come through reduced offerings from the few firms handling Russia’s wheat shipments.
A close eye must be kept on the Russian harvest over the next month for confirmation of the size and quality of the crop, Ehmke said. Once harvest pressure ends in the Northern Hemisphere and Turkey’s import ban expires, the wheat market is at risk of extreme volatility with Russia’s smaller harvest exposing the tightness of world inventories, he said. Other major exporters like Canada, Argentina and Australia may increase wheat acreage in response to higher prices, which would help ease the potentially low stocks-to-use ratio.
(Link: WorldGrain)
