Russia could reduce winter crops area by 5% on bad weather and taxes

Andrey Sizov 05.10.2021

SovEcon expects a substantial reduction in winter crops area this fall amid unfavorable weather conditions and a drop in farmers’ profitability. The planted area may decrease by 0.7-1.2 million hectares, or by about 5% compared to last year, according to SovEcon’s report. This will be the first reduction in winter crops area in the past four seasons.

The seeding of winter crops continues to lag significantly behind last year. At the end of last week, the gap exceeded 1 million hectares. Sowing stalls most significantly in the Volga region, where farmers planted 0.7 million hectares less than last year. SovEcon expects that the backlog will remain at the end of the campaign.

There is no separate data available for winter wheat but typically it accounts for around 90% of the total area.

The expected reduction in the area is associated with unfavorable weather conditions in the second half of summer and early autumn in the Volga Valley. In many parts of the region, drought has made farmers reluctant to plant in dry soil.

An additional factor is a serious deterioration in profitability in crop production against the background of a rapid rise in prices for inputs with artificially lowered grain prices thanks to export taxes. The Volga Valley suffers most seriously from this, where due to unfavorable weather conditions the yield this year fell to record levels for recent years. In general, SovEcon estimates the wheat harvest in the Volga Federal District at 11 million tons, which is 43% less than last year. The situation in crop production has noticeably deteriorated both in the Urals and in the Center as well.

On the back of news from Russia, wheat prices last Friday showed rapid growth, gaining 4.1% in Chicago and 2.3% in Paris. Russian wheat with 12.5% protein rose by $1.5 week on week to $ 306 / t FOB.