The sharp move lower in US wheat futures on Monday was not repeated last night. There were a lot of analyst wondering why US futures were falling as Russian wheat productions estimates were only getting lower. To see wheat cheaper on the back of that kind of fundamental news is a little perplexing. It did manage to flush out another tender from Egypt though. It’s almost like the futures market and the physical market don’t reflect each other…… shocking to think that, I know.
Egypt picked up 460kt of milling wheat, mostly from Black Sea suppliers but France also got a few tonnes away. The same sellers as in their last tender. Russian wheat remained noncompetitive. A media release from the Russian Grain Union may help explain why Russian wheat is currently moving higher in value. They report up to 30% of winter grains in the Rostov region were hit hard with frosts. This is a larger percentage than most punters have been working with. The black soil of the Rostov region is a very productive area and is responsible for almost half of the Russian winter wheat crop. The report states crop losses on up to 1mha.
The reports fails to quantify losses for specific commodities. If we look at 40% of the Russian winter wheat crop as being 36mt and of that 36mt 10% was to see, say a 100% wipe out, frost can be devastating, that works out to be about 3.6mt gawn, and possibly resulting in quality reductions on another 10% to 20% of the region. So lets call it 5mt gone of feed grain. It’s not a huge amount and if the season goes right for Australia, it could even be countered by production increases here, but it’s also not a volume to be ignored. It does represent a significant percentage of exportable stocks from Russia.
I remember a large frost event in the 90’s, the Garah area alone saw losses exceeding 300kt, many crops yielding nothing. So this may take a few headers in the field to see some proper numbers in the market. We must remember that the Rostov region was also in the grip of a drought at the time, yields were already expected to be penalised hard.