Russian spring wheat is planted at record pace
Russian farmers plant wheat at record high pace for recent years. As of end of the month 1.3 mln ha (3.3 mln acres) were planted which is 3.5 times more than a year ago and 2.5 times more than in 2017. The key reason is the dry weather in second half of April.
Some believe that Russia could expand spring wheat acreage this year, at this point we are not sure. We estimate the total spring wheat area at 11.9 mln ha (29.8 mln acres), slightly below 2018. Indeed, in many cases wheat provided better returns for farmers than other crops including sunflower in 2017/18. (Sunflower is another key cash crop for the country, think about this as beans/corn relation for US). However, there is a long-term trend of declining spring wheat area and we think it will remain in place this year.
Winter wheat area expanded, crop conditions are good
Winter wheat area is estimated at record high 15.5 mln ha (38.8 mln acres), slightly above 2018. It’s important to bear in mind that at this point no one knows what the actual area was as the data will be available only in a few months.
Winter wheat looks good in general all over the country. In the South (#1 export and producing region) crops conditions are close to average or slightly better, in the Center (#2) – better than average, some farmers describe the May weather as “almost ideal”. The noticeable exception is the Volga Valley region (#3), winter wheat looks worse than average in the region.
There is a slight concern about declining soil moisture levels in some Central and Volga regions. However, rain which I’m seeing right now out of my window in Moscow (Center) is likely to replenish moisture. More rains are forecasted in Russia in next 1-2 weeks.
New Russian crop is estimated at 83.4 mmt, the second highest one since 2017
After analyzing all available information, we decided to leave our Russian wheat crop estimate unchanged from April at 83.4 mmt (inc. Crimea which should harvest around 0.6-0.7 mmt) which is the second highest number after record-high 86 mmt harvested in 2017. First USDA estimate is to be released on May 10, we believe that the ministry will issue a more conservative number.
Ukrainian wheat crop is forecasted at 28.1 mmt, record-high level for post-Soviet times
Ukraine’s wheat crop also looks promising. The wheat acreage remained mostly unchanged from 2018 at around 6.6 mln ha. Current crop conditions in key producing regions are above average. The country is expected to receive more rains in next few weeks. As a result, number two Black Sea wheat exporter may harvest a crop of 28.1 mmt in 2019 which is the record-high level for post-Soviet times.
New crop 12.5% prot. Russian wheat is traded around $180-185 FOB July shipment. If weather forecasts come true and we see enough rains in May new crop estimates are likely to be revised up dragging new crop prices lower and putting more pressure on wheat around the world.
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