Russia is speeding up the spring seeding. As of April 29, spring grains were planted on 3.9 mln ha compared to 6.8 mln ha a year ago. Spring wheat was seeded on 822 ths ha compared to 1.3 mln ha in 2020 (-37% YOY). Seeding sped up on warmer weather, a week earlier wheat was planted on 0.4 mln ha (-57% YOY). We believe that this difference will narrow further in the future and expect to see spring wheat area above the previous year at the end of the campaign.
Some are expecting that Russian farmers would cut the area under wheat this year on new restrictive export taxes. Currently, it’s 50 eur/mt ($61/mt). From June 2 a new “floating” tax kicks in. The government will be taking 70% of the difference between the index export price and $200 (i.e. if the index is $250 the tax is $35 (0.7X(250-200)).
We doubt that the tax will have a noticeable effect on the 2021 crop. Winter wheat has been planted months before the announcement of the export restrictions. Switching from spring wheat to other crops will be challenging for majority of farmers because of crop rotation limitations, limited time window or just simply lack of seeds. Also bear in mind that wheat is not the only crop which market is regulated by the government. Almost all key crops are now being indirectly regulated by export taxes or price-fixing schemes (corn, barley, sunflowers, soybeans, rape, sugar beets) so finding an alternative to wheat is a tough task.
Currently, we estimate Russia’s spring wheat area at 12.7 mln ha (+0.1 mln ha YOY). In fact, this number could be even higher because of bigger winterkill and larger replanted area in the Center and parts of the Volga Valley where crops have suffered a lot in late winter. SovEcon’s April wheat crop estimate is 80.7 MMT (85.9 MMT in 2020), the new forecast is to be released shortly.
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