For the 2019-2020 marketing year, the Russian Ministry of Agriculture is limiting the amount of grain that can be exported. This is because the harvested volume is lower than previously estimated. However, the coming harvest could turn out very differently.
The rumor that the export of grains would be limited has been circulating among stock traders and analysts for some time. Today, January 14, the ministry announces that this is actually the case. The target is set at 2020 million tons of exports between January and June 20. Analysts - such as the well-informed SovEcon - expect this bar to be lowered further, because this level is unlikely to be achieved.
Reduced export expectations
In their WAS THEreport for January, the US Department of Agriculture (USDA) lowered their export forecast for Russian wheat from 35 to 34 million tons. The expectation for the EU increases from 29 to 31 million tons of wheat. The Russian ministry itself speaks of 45 million tons of grain exports in total for the whole of 2019-2020.
However, analysts such as Andrey Sizov of SovEcon expect the final figures to be even lower. SovEcon puts the export level at 31,6 million tons. Despite a lower export volume, Russian prices are still competitive. With more wheat in the EU and US, this is necessary to remain competitive. The oppressive supply from these 2 areas prevents a price rally. A smaller harvest in Argentina and Australia does not have enough weight to change the balance.
Growing season is disappointing
The reason for a disappointing yield in Russia is the drought and heat, which cost many kilos, especially in June. This could be a completely different story for the 2020 harvest. Thanks to favorable weather conditions last autumn, a lot of winter wheat was sown in a short time. The weather throughout Russia is extremely mild, which means that crops are highly developed. It is quite dry. There is hardly any snow cover. There is no fear of wintering out, because temperatures do not fall far below zero.
SovEcon therefore estimates that a grain harvest of over 80 million tons is possible if there are no weather problems in the growing season such as in 2019. 2017 had such a good growing season, which ultimately yielded 85 million tons of grain.