IKAR in Mass and Industry Media

Russia Risks Wheat Price Drop on Big Crop, Ikar Says

Bloomberg

(Bloomberg) -- Russia is on track to produce another bumper crop on top of already bulging stockpiles, which could cause prices to plunge, according to the Institute for Agricultural Market Studies.

Farmers planted a record acreage of winter grains and the crops are in excellent condition, Dmitry Rylko, Ikar’s director general, said at a conference in Moscow on Thursday. Exports have been running at a slower pace than expected, meaning inventories will probably be “huge,” he predicted.

“If Russia comes to the world market with an offer of a colossal harvest, then that will, of course, be a catastrophe for prices,” he said.

Another big crop from Russia, the world’s top exporter, could depress an already saturated market. After four straight seasons of record harvests, bins are bulging from Kansas to Queensland, Australia and benchmark prices are near the lowest in a decade.

Read more: Too much wheat is forcing farmers to other crops

It’s still early in the growing season for winter wheat and weather conditions can affect final harvest. The seeds are sowed in autumn and plants go into dormancy in cold weather. In the spring, when development resumes, rain and temperature will determine the final yield. The plants are harvested from June and make up two-thirds of Russia’s total wheat crop.

Russian shipments this year have been slower than expected as farmers were reluctant to sell amid low global prices and a stronger ruble, which made Russian supplies less competitive for international buyers. Export prices are at an eight-month high of $186 a metric ton, Ikar data show.

Ikar estimates a wheat crop of 67.5 million tons this year, compared with last year’s record 73.3 million tons. That’s a conservative estimate, given that current conditions could justify a forecast of 75 million, Rylko said.

The acreage was 17.4 million hectares, including fodder grass, up 1.8 percent from the previous year, Agriculture Ministry data show.

If Russia sells 28 million tons of wheat overseas by the time the season ends in June, carryover stockpiles will reach a record 14.7 million tons, according to Ikar.

13.02.17

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