Russia: Early harvest expected to result in very strong early season exports of wheat and barley – Newsletter No. 23b (2013-06-11)

Russia represents not just a revived threat on grain export markets, but an imminent one too, with the harvest expected to start so early that farmers will, unusually, be able to plant a follow-on crop of soybeans, Agrimoney.com reported on June, 6.

The weather in the south of the country, which last month posed dryness concerns before the arrival of some rains, has in fact proved so “favourable” that it has accelerated development of autumn-sown crops, the US Department of Agriculture’s Moscow bureau said.

In the area of Krasnodar, a major source of grain for exports, “farmers may begin harvesting winter wheat in the middle of June, two weeks earlier than normal,” the bureau said, adding that the crop was “in very good condition”.

The prospects of an early harvest are prompting some growers to consider a follow-on planting of so-called “double crop” soybeans – a practice far more common in countries such as the US – helping meet the country’s growing demand for the oilseed.

“Some farmers even have mentioned that they may sow soybeans or some other late spring crops on winter wheat harvested area,” the bureau said in a report.

The timely harvest also means that the wheat market in particular, by far Russia’s main export grain, faces the prospect not just of a larger volume of shipments to deal with – from a country renowned for its price competitiveness – but an imminent one too.

“It is expected that the larger wheat crop in the Southern and North Caucasus federal districts will stimulate speedy exports from these traditionally export-oriented provinces,” the report said.

The early harvest “is expected to result in very strong early season exports of wheat and barley”.

Separately, Luke Mathews at Commonwealth Bank of Australia said: “Expectations that former Soviet Union producers will harvest a very large wheat crop this year has resulted in the region becoming very aggressive in the export market.”

The strong Russian hopes contrast with drought-diminished crop last year, which limited grains production to 71 mln tonnes, including 49.6 mln tonnes of wheat.

Nonetheless, the USDA bureau was more cautious than many other commentators on the prospect for Russia’s overall harvest, foreseeing grains output this year at 91 mln tonnes, including 53.0 mln tonnes of wheat.

“Wet and cold weather in Urals and Siberia has significantly slowed down spring grain sowing in these districts and this may impact production,” the bureau said, if adding that with these districts growing primarily for domestic use, “this is unlikely to have a significant impact on exports”.

Ilya Shestakov, Russia’s deputy agriculture minister, on June, 5 pegged the domestic wheat harvest at 54-55 mln tonnes, while the USDA itself sees the crop at 56.0 mln tonnes, although analysts at consultancy SovEcon have pencilled in a 50.0 mln-tonne harvest.

Russia’s early shipments may represent a boon for consumers, given that crop development in many European Union countries was slowed by an extended winter, increasing chances of delayed harvest.

The proportion of soft wheat in France, the EU’s top producer, reaching the heading stage as of May 27 was 35%, down from 85% a year before.

Investors are also factoring in a mixed start to the US harvest – with yields in the dry southern areas reaped first seen as variable, if with protein levels holding up – and the, diminishing, risk of any long-term fall-out on exports from the discovery of unapproved genetically modified wheat in Oregon.

However, Russia’s export prospects further ahead are complicated by a government quest to rebuild stocks run down in 2012-13 as the country coped with the hangover from last year’s drought-hit harvest.

Mr Shestakov on June, 5 estimated Russia’s exportable surplus of grains at 18 mln – 20 mln tonnes, including 15.5 mln tonnes of wheat, adding that the government would intervene to ensure shipments stick to these figures, meaning purchases of up to 5m tonnes of grain.

The USDA bureau cautioned that intervention buying represents a “significant unknown” for the market, which could “significantly impact prices and exportable supply”.

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