(Bloomberg) -- Russia’s wheat crop is looking even bleaker by the day.
In the past week, several analysts ratcheted down their estimates for Russia’s wheat crop because of bad weather. Dryness in the south, the main growing region, has parched crops, while cold and soggy conditions are hurting fields in Siberia and the Urals. The U.S. Department of Agriculture on Tuesday cut its estimate for the crop, which it sees shrinking for the first time in six years.
“The prospects for the new crop are melting down,” Arkady Zlochevsky, president of the Russian Grain Union lobby group, said at a conference in the country’s southern city of Gelendzhik on Friday.
The lower forecasts are helping fuel a rally in prices, and money managers are the most bullish in 10 months. The bleakest estimate is from the Russian Grain Union, which sees the crop shrinking as much as 21 percent from last year. The harvest size -- still expected to be the nation’s third-largest on record -- was in focus when the USDA released its latest world estimates today.
The agency lowered its estimate for Russia’s crop by 4.9 percent to 68.5 million tons, and also reduced its outlook for the country’s exports.
A lack of rain in the south in May and June will probably cut wheat yields by 30 percent from a year earlier, according to the trading unit of southern grower Steppe Agroholding. Any showers before winter wheat starts being harvested toward the end of the month probably won’t help crops, said Alexey Novoselskiy, general director at the trading unit based in Rostov-on-Don.
Here’s a breakdown of recently lowered estimates for the 2018-19 season:
- Russian Grain Union: 68 million to 69 million tons
- ProZerno: 70.4 million tons
- Institute for Agricultural Market Studies: 71.5 million tons
- SovEcon: 73.1 million tons
- USDA: 68.5 million tons
Wheat futures have climbed about 22 percent in Chicago this year, making the grain one of the top-performing commodities, as speculators turned bullish on prices. Money managers raised bets on higher prices to the most since late July in the week to June 5, U.S. government data show.
Russian winter wheat is typically harvested in the two months or so through August, mainly in southern and central regions, while spring crops get planted in eastern areas around May. Those sowings continue to be delayed by cold and wet weather, according to ProZerno.
“It’s an absolute drama in Siberia that had blizzard conditions as recently as May,’’ Vladimir Petrichenko, director general at ProZerno, said at the conference.
The adverse weather has come after farmers reduced purchases of fertilizers and crop-protection chemicals amid lower profit margins this season, Zlochevsky said. That means crops now being grown are more exposed to weather risks, he said.
While conditions have been unfavorable in parts of the south and east, wheat in central Russia, another major growing region, is in a better shape than normal, SovEcon said.
©2018 Bloomberg L.P.