Miller Magazine Issue 108 / December 2018

RUSSIA 88 MILLER / DECEMBER 2018 About 88%-89% of winter plantings in Russia is whe- at, thus it is approximately 16.2-16.4 MLN HA in 2019 vs. 15.84 MLN HA in 2018, +0.5 MLN HA y/y. Herewith, total area under wheat for 2019 harvest (both spring and winter) is expected to reach 27.6 MLN HA, which is higher than last year’s 27.3 MLN HA. It is only by 0.3 MLN HA y/y higher, as SovEcon foresees a decrease in the area under spring wheat, as farmers in Siberia are switching to oilseeds production. As well, SovEcon stres- sed, that cold spell could potentially damage part of the sowings in the European part of Russia in the beginning of December and that the conditions for winter grain sowing in the Volga, the South and Center regions were worse than the average of recent years in large parts of Russia because of the lack of rain in recent months. Reu- ters noted, that AgResource also stressed “Russia faces extremely dry soil (this autumn), which is a significant change compared with the previous two years”. Roub- le depreciation was also mentioned as a factor limiting usage of crop nutrients and imported seeds by farmers. Russian fertiliser producers freezed domestic prices for their products for 2019 winter sowing campaign. We should remind that this time last year SovEcon made its first projection of 2018/19 Russian grain harvest 2018 at 128.2 MMT after 2017 record of 134 MMT. It included 76.7 MMT of wheat compared to a record 83.9 MMT in 2017 ba- sed on expectation that the coming winter will be relatively favourable for winter grains, with 6% of sowings lost. Q1 to be hot for CBOT As per Rabobank, “CBOT wheat remains elevated in the short term, as demand favours US supplies in early 2019”. At the same time, Rabobank, has “bearish lon- ger-term outlook as an increase in global acreage impro- ves the 2019 supply outlook”. IGC forecast in November that global wheat acreage in 2019/20 to increase for the first time in four years, by nearly 1% y/y, to 220 MLN HA, including predicted gains in the EU, USA, Russia, In- dia and Australia, but dry soils are a concern in many countries. For those waiting for lower wheat prices... you can wait further 2018/19 global wheat stocks forecast was estimated by the IGC in November at about to 262 MMT, -11 MMT y/y. Herewith, if we exclude Chinese stocks, we will have -22 MMT y/y, which is the first decline in six years, with major depletion in biggest exporting nations Russia (-4.2 MMT y/y), the US (-4.9 MMT y/y) and the EU (-4.6 MMT y/y). Thus, even bigger Russian, EU or Australian crop would not change the firm price trend dramatically. Wheat factors to watch: * Results of winter wheat planting campaigns * Watch cold damage risk for BS winter grains, snow coverage * Official and unofficial export regulations in the BS * SovEcon noted navigation pause in the Kerch Strait on Nov 25-26 did not have a noticeable impact on the market. Howe- ver, if the tensions between Russia and Ukraine continue to increase, this may lead to new, more conflicts in the strait and will seriously support the world wheat market * Australian crop results * Wheat harvesting results in Argentina * Higher expectations of EU demand for feed wheat * Asian and African demand