Wheat prices would get a boost if the country’s exports remain as low as much of the trade is beginning to forecast
A big debate is once again brewing about how much wheat the world’s leading exporter will ship out in the upcoming crop year.
The U.S. Department of Agriculture is forecasting Russia will produce 83 million tonnes of the crop and export 45 million tonnes.
SovEcon is forecasting 81 million tonnes of production and 39.7 million tonnes of exports.
If the USDA is right about global demand but is overestimating Russia’s exports by about five million tonnes, that would have big ramifications for the world wheat market.
“It means that the market will need to find those five million tonnes elsewhere, potentially in the U.S., which sits on relatively large stocks,” SovEcon analyst Andrey Sizov said in an email.
That would boost U.S. wheat prices, which are directly linked to Canadian prices.
Neil Townsend, chief analyst for GrainFox, said most of the people he has spoken with on the ground in Europe would side with the SovEcon estimate, and so is the trade.
“The market participants are not agreeing with the USDA,” he said.
“The general consensus I see about USDA numbers for the Black Sea is they just have lacked a little nuance.”
Townsend said the USDA’s 2025-26 export number seems high given that Russia is going to end the current crop year with relatively tight supplies following a decent 2024-25 export program.
Russia had 20.3 million tonnes of wheat stocks as of April 1, down from 27.5 million tonnes a year earlier, according to Rosstat.
And there are problems with the crop that is in the ground.
“This year’s crop is maybe not a write-off, but it’s definitely not looking like it’s going to be a bin-buster,” said Townsend.
That is why he believes it will be tough for Russia to ship out 45 million tonnes. Prices would have to be much higher than they are today to attract that volume.
Sizov believes the USDA is chronically overestimating Russia’s exports.
The USDA’s first estimate for the 2024-25 crop year issued in May 2024 was 52 million tonnes. By June it had dropped the forecast to 48 million tonnes.
Its current estimate is 43.5 million tonnes, but Sizov believes that is still too high. SovEcon’s estimate is 40.9 million tonnes.
“July to May shipments are estimated by us at around 39 million tonnes, leaving 1.9 million tonnes for June, the last month of the season,” he said.
Sizov doesn’t want to speculate about why the USDA appears to be inflating its Russia export number.
“But I know that they have been cutting Russian feed consumption for several years in a row,” he said.
That doesn’t match with statistics suggesting that the country’s livestock sector is growing by two to three percent annually.
“SovEcon’s domestic consumption estimate has been rising gradually, reflecting bigger feed domestic consumption, making the grain export surplus smaller,” said Sizov.
There has been some improvement in Russia’s winter wheat crop conditions in recent weeks thanks to rain.
But overall, about 70 percent of the crop remains below average due to dry conditions earlier in the year, he said.