48 Like Us on Facebook: BetterFarmingON Better Farming | August 2024 Weather issues in the Black Sea region have affected grain production prospects in Russia, especially wheat – two-thirds of which were hard red winter (HRW) and one-third soft red winter (SRW). This fueled global wheat futures during the spring, which in turn supported higher ag commodities. But all that enthusiasm dissipated during early summer as there was no threat to the 2024 North American crops despite the second wettest U.S. Midwest planting season since 2019 in 130 years! We may not have heard the end of the 2024 Russian (and Black Sea region) wheat story yet, however. Russia is the biggest exporter of wheat in the world and Ukraine is the sixth biggest. This means that the Black Sea region continues to be the breadbasket of the world. The region exports wheat to most of the prominent wheat importing countries in Asia, Africa, and the Middle East. As Russia has risen in recent years to lead the wheat production and export market, what happens to the crop there will reverberate across the global wheat market. Since the Russia-Ukraine war broke out and the Black Sea grain export deal was agreed upon, Russia has been undercutting global wheat prices (like those from the U.S.) due to year-uponyear (Y/Y) of strong domestic wheat supplies and exportable surpluses. Aided by government support, Russian wheat quotes were the most competitive through 2023. This is despite efforts by the government to set a floor price. In 2010, global grain markets were initially boosted by the drought in Russia’s wheat regions, followed by a wheat export ban. That was then followed by a dry three years in North America that peaked in 2012 and led to much higher grain prices. The 2024 weather situation has been worse, with the Russian Union forecasting a low 79.3 million metric tons (MMT) wheat crop, which is down by 12.2 MMT versus last year’s 91.5 MMT wheat crop. In August of 2010, Russia completely banned exports of 2010-2011 grains as drought severely impacted the cropping regions there and grain production shrunk. Global grain prices rose to ration demand. In 2010 and 2012, severe drought caused the Russian wheat production to drop by a third versus the year prior. Although the 2010 drought impacted Russia’s southern wheat- growing regions more and did not impact wheat crops in the North, due to the complete ban, wheat from that region also could not be exported to the global market and it was supplied to the domestic market. The market is currently focused on the 2024-2025 Russian wheat crop, which is critical for global supply and is being impacted by drought. In the June World Agricultural Supply and Demand Estimates (WASDE) crop report, the U.S. Department of Agriculture (USDA) made a significant and surprising cut to the 2024-2025 Russian wheat crop of five MMT to 83 MMT. They also cut the Ukrainian crop by 1.5 MMT to 19.5 MMT. This will tighten the 2024-2025 export outlook from Russia and Ukraine. The Russian winter wheat crop was hit by a frost this year, which was followed by hot and dry weather. This has impacted the crop’s yield. At the same time, the Ukrainian wheat supplies are also tightening. Production is sharply lower versus the recent average and the carry-in for 2024-2025 is the lowest in recent history. These issues for the region will impact their wheat export potential. Russia could still announce a wheat export ban this year and, separately, India could start to import wheat after wheat reserves there hit a 16-year low. Both these factors are supportive for wheat prices. But the North American wheat harvest is weighing on prices nearterm, and the speculative funds are yet to go net long in wheat futures. So once the North American wheat harvest comes to an end, wheat prices could still put together a surprising rally. BF RUSSIA WHEAT PRODUCTION FALLS North American wheat harvest is weighing on prices near-term. By Moe Agostino & Abhinesh Gopal Moe’s Market Minute Russia could still announce a wheat export ban this year. Sergii - stock.adobe.com photo MOE AGOSTINO & ABHINESH GOPAL Maurizio (“Moe”) is chief commodity strategist with Farms.com Risk Management and Abhinesh is head of commodity research.
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