Growing concern over the worst drought in a century in Russia, Eastern Europe and Central Asia have rocked the wheat markets in recent weeks, driving the CBOT contract to outperform Oil and Gold YTD (see chart). Projections for the shortfall of combined Russian, Kazakhstani and the Ukrainian wheat exports run as high as 8MT lower than USDA forecasts and rumours of an export embargo by both the Russian and Ukrainian governments have been published by Bloomberg and other outlets. Here are some key data points drawn from recent issues of The Macro Report:
· Russian Agricultural Ministry has reduced harvest projections from 97 to 85 million MT, with potential for further declines due to dry weather.
· Kazakhstan’s ministry of Agriculture estimates that this season’s wheat harvest will total 13.5-14.5 million MT, a 40% Y/Y decline. With 7 million MT in supply remaining from last season, the ministry does not anticipate supply issues domestically, but it may impact exports.
· The Ukrainian agriculture ministry has adjusted its projections for grain harvest levels to 42 million MT versus 49 million MT last year, still higher than independent projections.
· Canadian forecasters have cited citing crop damage and lower planting levels caused by persistent wet weather this year. Total land unplanted due to conditions may exceed 4 million acres, with anecdotal reports that late planted crops may be severely damaged.
Photo: Waverly Advisors