Miller Magazine Issue: 120 December 2019

58 COVER STORY MILLER / DECEMBER 2019 Bearish • Abundant world wheat crop 2019/20 • World wheat stocks at the end of 2019/20 are seen recouping the losses of the year before to broadly match the peak of 2017/18, as per the International Grain Council • Good world crop 2020/21 could not be excluded, so far Russian wheat plantings are higher y/y, condition of grains not bad, although moisture is already required • Algeria is targeting a sharp reduction to its wheat imports to 4 MMT a year, down from 6.2 MMT In July-October 2019/20, Russia exported 15.6 MMT of wheat, which is 45% of November WASDE forecast of 34.5 MMT. It is below last year’s pace, when 17.4 MMT or 49% were exported on fears of possible government limi- tations of export. Meanwhile, Russian competitors, such as the E.U., Ukraine and the U.S.A. combined exported about 50% of their export surplus vs. about 40% same time last year. Taking into account that in general, wheat stocks from the previous season are lower in major expor- ting countries, this factor could lend additional support to Russian wheat prices in the second half of the season (Jan-Jun 2020). Thus, Crouching Tiger strategy could put Russia in the winners in terms of earnings additionally to the expectations that it will preserve its status of #1 world wheat exporter in 2019/20 for the 3rd consecutive year. Bullish • Higher demand in advance of the New Year holi- days • Reluctance of Russian farmers to sell wheat at cur- rent levels • Additional demand for Russian wheat, coming from Kazakhstan (Kazakhstan may import from Russia a re- cord of 1.5-2.5 MMT of grain this year due to lower inner crop) • Agreement for Russian and Kazakh wheat supplies to Iran (about 3 MMT) • Tariff-free import quota for 750 KMT of wheat im- port to Brazil • Uncertain future of winter grains in Russia and Uk- raine (although analysts are underlying that the risk of winterkill is low so far) • Forecast of lower EU wheat acreage 2020/21 by Strategie Grains (-0.1 MLN HA to 23.7 MLN HA due to decrease in the U.K. and France) • Expectations that U.S. winter wheat acreage to be the lowest in 110 years • Possible decrease of wheat crop in Argentina to 17 MMT vs. 20 MMT in November WASDE • Expectations that Australian wheat crop could drop to about 15.5 MMT vs. 17.2 MMT in November WAS- DE.