Grain yields in Eastern Europe are expected to be massively down this year following prolonged and damaging drought.
In southern Russia, harvest was almost 80% complete, and yields were 25-30% below last year, according to analyst Offre & Demande Agricole UK.
“The situation is very similar in Ukraine where conditions have been terrible throughout the growing season, and expectations are that production will be 40-50% lower than last year,” said market analyst Leo von Kameke. “Kazakhstan has been similarly affected.”
Russia, Ukraine and Kazakhstan traditionally accounted for around 25% of global wheat exports, but this was likely to drop to less than 15% during 2012.
“With Russia’s exportable tonnage likely to fall by over 50% this year, this has led to fears of another ban on exports.”
The Russian food security committee was set to meet tomorrow (8 August). “Any announcement of an export ban or tariff would spark further price rallies,” said Mr von Kameke.
“Lower production throughout the Black Sea region, which will not be offset by increased production in Europe, will result in an overall deficit, and wheat will have difficulty in replacing the shortfall in US maize production.
“We recommend that farmers keep a close eye on the markets and take the opportunity to lock into higher prices when they are at levels which give them an acceptable margin.”