The grain harvest outlook for Russia, Ukraine under threat due to drought

The grain harvest outlook for Russia, Ukraine under threat due to drought
Drought threatens the harvest in Russia and Ukraine
By Vadim Dumes in Paris June 13, 2018

Crops in Russia and Ukraine have been hurt by hot dry weather that may reduce the harvest this year. Drought in the southern Russian regions of Rostov, Stavropol, and Volgograd coupled with extreme cold in Ural and Siberia, is threatening this year’s grain harvest, Vedomosti daily reports citing outlooks of several independent market watchers and the US Department of Agriculture.

After collecting a record-high harvest of 134mn tonnes in 2017, which helped to keep food inflation low and brought $20bn in grain export revenues. Previous estimates showed that Russia is on track to bring in yet another solid grain harvest of 116.9mn tonnes.

However, now the domestic Agriculture Market Studies (IKAR) cut the harvest forecast for the second time this month from 117mn to 114mn tones for grains in general and from 73.5mn to 71.5mn for wheat in particular. The USDA cut the wheat harvest estimate for Russia by 5% to 68.5mn tonnes.

SovEkon analytic centre has also cut the grain harvest forecast from 124mn to 199.6mn tonnes, including for grain from 77mn to 73.1mn tonnes. The representatives of the Ministry of Agriculture have lowered the official harvest target to 110mn tonnes and it could fall as low as 100mn tonnes, according to Vedomosti, although compared to previous years that is still a healthy harvest.

The story is similar in Ukraine which is also suffering from a drought. Ukraine’s 2018-2019 crop year wheat and barley harvest and exports are expected to decline due to a severe drought across the country, according to a report published by the UkrAgroConsult agriculture consultancy on June 12. The consultancy's wheat harvest forecast was lowered by 3% to 25.5mn tonnes and exports to 16mn tonnes from 17mn tonnes forecast in May. Satellite images of Ukraine show that up to 70% of the crops are drying out due to high temperatures, the local press reported on June 13.

Mike Lee, an independent agricultural consultant is current on his annual Black Sea Crop tour and has also reported on his twitter account that conditions are very dry, but said it was still too early to say if or how much damage to the harvest this weather will do.

In Russia wheat prices in Siberia have already reacted to changing outlook and jumped by 20%, while other regions so far have avoided sharp wheat price fluctuations. However, some analysts surveyed by Vedomosti believe that the forecasts could recover towards the harvesting season counterbalanced by higher crop yields.

Previously the head of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko suggested that Russia’s export of grain may double to 52mn tonnes in the 2018 agricultural season. Within this number, the export of wheat is also expected to rise and account for 40mn tonnes of exports, which is a record figure.