Commentary
The two main crop scouts in Russia continue to downgrade Russia’s wheat crop. First IKAR cut its Russian wheat forecast by 2 million metric tons to reach 81.5 million metric tons. Second, Sovecon lowered the wheat crop 3.6 million metric tons to arrive at 82.1 million metric tons. Both moved their estimates based on worsening dryness with no clear path for relief for the current drought via extended models. Russian FOB values improved by 1 to 4 dollars per metric ton today. The Ukrainian Grain Association has reduced its wheat crop forecast to 19.1 million. Both countries production comes in just above 100 million metric tons. If downgrades continue and total production comes in below 100 million then the tightness may have a noticeable impact on global wheat trading patterns. The southern half of Russia’s crop is under stress, while Ukraine’s wheat belt just experienced its driest 30 days of the past 45 years for the period. June weather is critical here. Production levels can improve or decrease significantly during June in my opinion. Weather and not the war could lead to potential price rationing for two of the World’s top wheat exporters.
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