All eyes turn to harvest of Russian crop

Through ongoing African swine fever outbreaks and consequent increases in protein demand, drawdown in global grain stocks and backed up freight pathways, there have been ongoing consequences into the 2021 marketing year.

This year has already delivered us weather events that have dominated the thinking of grain traders globally, whether it be drought, a 'heat dome' or floods.

And now, after a majority of the news in the marketplace being about the issues in the spring wheat crop in Canada and the United States, we have something new to talk about - Russia.

Yes, the weather issues and crop concerns out of the spring wheat crop are important to discuss, but the impact of hot weather will not fully be known until headers start to roll through those states. It will have a significant impact on the global canola trade, with the weird trade flows of Canada importing from the Ukraine likely to continue.

Given Canada accounts for 64 per cent of canola trade globally, there is likely to be a canola supply deficit for the next 12 months.

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But now all eyes move towards the crops in Russia.

For all intents and purposes, Russia has been mainly absent from global trade over the past eight months due to the introduction of a 'wheat tax' to curb Russian exports and protect domestic pricing. This was looking to subside, particularly as harvest pressure was increasing over the new wheat crop currently coming out of the paddock.

But it will be interesting to see what happens in the next few months.

As headers have begun to move in Russia, initial estimates on yields are looking poorer than expected.

Early estimates were more than 80 million tonnes out of Russia, but the most recent reports have definitely put a dampener on enthusiasm.

The Russian wheat crop always tends to be underestimated in the trade as most estimates are developed from state-released area figures. This year was no exception, until a smaller winter wheat area was reported last Friday by Rosstat.

This area was reduced by 1.2 million hectares, or almost a decrease of 4mt.

A winter kill event through parts of the wheat crop is the main reason for the reduction in expected harvest area.

Additionally, a hot and dry July through parts of the key Russian spring wheat areas is likely to have a negative impact on yields, both on spring wheat and, to a lesser extent, the winter wheat.

Some areas are facing the lowest soil moisture reserves in almost a decade, a similar story to parts of southern Canada and the northern US.

How this impacts markets will be interesting to watch.

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The US Department of Agriculture had pegged the Russian wheat crop at 85mt, and now we could be looking at a crop closer to 76mt. That's a substantial amount of tonnage now likely to be missing from the marketplace.

With Russia, the number one wheat exporter, experiencing a shrinking crop size and Canada, the third or fourth largest wheat exporter, being largely drought-affected, the marketplace is crying out for confirmation of what the crop actually looks like for 2021-22.

In Australia, we have a crop that, presently, is only getting bigger, while the crop overseas shrinks in size.

This is why all eyes will be focusing on the vital USDA report that comes out next Thursday night.

The key numbers to watch will be crop estimates out of Canada and Russia, as well as updated numbers on the size of the supposedly record wheat crop out of Ukraine.

The corn crop in Brazil is still factoring in feed markets as well, so estimates on the size of the safrinha crop may add some activity to the corn markets.