August 12, 2011
Russian Black Sea to surpass US wheat exports
Russia's Black Sea region is to restore exports nearly to pre-drought levels, overtaking the US in the trade, thanks to competitive prices and better-than-forecast harvests.
The US wheat harvest is to drop to a four-year low of 2.08 billion bushels (56.5 million tonnes) this year, some 30 million bushels (800,000 tonnes) smaller than previous expected, thanks to weaker expectations for the spring crop following a wet spring, the USDA said.
"Flooding and prolonged wet weather during the spring and early summer months slowed crop development in most states," the USDA said.
However, crops in all the three major Black Sea producers, Kazakhstan, Russia and Ukraine were raised, albeit with the caveat that in Ukraine, "heavy rains during harvest have reduced crop quality".
The Kazakh crop was upgraded by one million tonnes to 16 million tonnes, reflecting a higher estimate for sowings and yield.
"The wheat crop in the major production region has benefited from above-average precipitation throughout the growing season, and satellite-derived vegetative indices indicate outstanding crop conditions," USDA analyst Mark Lindeman said.
In Russia, the harvest estimate was lifted by three million tonnes to 56 million tonnes, given in-country reports of a 35% rise in yields, and with weather "generally favourable for spring wheat", except in parts of western Siberia.
The extra production, in a region renowned as a fierce competitor on export markets, will drive former Soviet Union shipments to 33.2 million tonnes, 5.5 million tonnes higher than previously expected.
They will also overtake US exports, for which the USDA cut its estimate by 1.4 million tonnes, to 29.9 million tonnes. The region has only three times previously shipped more wheat than America.
The report was overall deemed "neutral" for wheat prices, by Rabobank analysts, who said that the estimates suggested "that while US fundamentals will tighten in the new season, global supply will remain ample".
While cuts to estimates for corn supplies suggested greater use of wheat in feed, the "abundant supply" of the grain relative to corn and soybeans "means that wheat prices will underperform the other markets".
However, at PitGuru, Matthew Pierce termed the spring wheat revision "shockingly bullish" for prices of the variety, which is traded in Minneapolis.
"The drop in production and stocks for hard red spring is alarming for shorts [holders of short positions] there so look for Minneapolis to show best strength in the wheat world," Mr Pierce said.
With an hour of trading to go, Mineapolis's September contract was 2.7% higher at US$8.59 a bushel, narrowly ahead of Chicago's September lot, which was up 2.6% at US$7.02 ?a bushel.
Kansas hard red winter wheat for September was 2.1% higher at US$8.01 a bushel.