SovEcon cut Russian wheat crop estimate from 76.6 MMT to 73.7 MMT after assessing the situation in Center and Volga Valley. The dry weather which we observed in May-June had a significant negative effect on crops in almost all key winter wheat regions.
Estimate for Volga Valley Federal District (FD), #3 wheat producer, was cut by 1.4 MMT to 11.5 MMT, for Center FD (#2) – by 1 MMT to 17.1 MMT. South FD (#1) was also downgraded, by 0.7 MMT to 30.9 MMT.
The total wheat figure now is slightly above 2018, when Russia harvested 72.1 MMT.
A long period of hot and dry weather in late May – June was a game-changer for the crop prospects this year. Many wheat regions received only 20-60% of normal precipitation during this period. Before mid-May yield potential looked significantly above average thanks to generally favorable weather during winter and spring. In early May our projection was 83.4 MMT. Since late May we started to lower estimates warning about negative weather forecasts.
We believe that now recent dryness and its effect on winter wheat is mostly reflected in the current total wheat crop estimate. There is a still question mark above crop prospects in the Asian part of the country, which mainly produce spring wheat. We still expect the region to produce a crop with a yield above average.
We guess that the market still tends to overestimate Russian wheat crop and doesn’t reflect recent downgrades in prices which currently are around $196/mt (FOB deep-sea, 12.5% prot.)