Russian Wheat Crop Thirsty for Much-Needed Rain

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LONDON (Dow Jones) — Extreme dryness across southern Russia is stoking fears that the key wheat-growing region will experience further crop losses, and the situation even threatens to tighten the world’s exportable wheat surplus, experts said Monday.

The global market is still wary of extreme weather affecting Russian production, and consequently its grain export levels, after the key supplier temporarily introduced an embargo in 2010 when devastating drought cut its harvest by around a third. The current problems aren’t yet seen as severe enough to prompt speculation of possible restrictions on exports, but the situation will be closely watched in case it escalates.

The overwhelmingly dry conditions across the southern Russian wheat-growing region leaves its crop at risk of a substantial downgrade, Rabobank said, and importantly threatens to tighten the world’s exportable wheat surplus for 2012-13.

The bank downwardly revised its wheat production forecast for the country by 2 million metric tons, to 53 million tons, and also cut its export estimate to 15.5 million tons from 17 million tons. The weather forecast continues to look dry and further crop damage is a risk, Rabobank added, despite it getting late in the crop’s agronomic development to see major yield downgrades.

FCStone Europe said forest fires are now being reported as widespread in the dry areas of Russia’s wheat-growing regions, explaining why the trade is so nervous about the potential impact, as the situation seems similar to the pattern that was established during another of the country’s harsh droughts in 2007-08.

Rains over the last week failed to alleviate concerns, as temperatures remained higher than averages expected at this time of year, and the situation also looked very similar to that which preceded the most recent drought two years ago, said Jaime Nolan-Miralles, a commodity risk manager at the company.

However, he said it was important to note that the outlook for the coming week does bring good rains for Ukraine, which are expected to push across into southern Russia from Thursday through to Sunday. This may go some way to calming current market nerves, Nolan-Miralles said, as temperatures too look as though they may fall during the week and into the weekend.

There have been relatively modest price rises for domestic Russian wheat in the South and Central Black Earth regions, said Institute for Agricultural Market Studies general director Dmitry Rylko, as stocks are already very tight. Another indicator of market tension is increased prices in the country’s key wheat flour production region of Altai, he added.

 

Source:  Dow Jones

Posted by Haylie Shipp

 

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