Russia and the wheat market

Farm and Ranch August 2, 2010 Wheat futures have been on fire as of late because of the impact of drought on Russian wheat production and the potential opportunity that gives other wheat exporters, like the U.S.

USDA grains analyst Jerry Norton sums up what has been going on in Russia.

Norton: “They have had this ongoing weather problem with extended drought, severe drought now. They had dryness starting in April. To pile on to that they had very high temperatures in June and they continued that through July. So we had a situation where they are facing some extreme temperatures and dryness on their spring planted crop.”

Norton says Russia isn’t the only country in that region of the world with wheat production issues.

Norton: “It is not just Russia, it also affects Kazakhstan and we have been seeing some stories in recent days about issues in the Ukraine. The main issue in the Ukraine has been heavy rain during harvest. That whole part of the world is kind of facing some unusual weather at this point.”

Canada of course had severely reduced spring wheat plantings because of wet conditions.

So, the market bulls have been in charge but some analysts question the need for wheat prices to be this high and they expect a bearish market to return by fall. The reason? Despite the production problems there will still be a lot of wheat around. The International Grain Council recently reduced its estimate of world production but its forecast would still be for the third largest wheat crop on record. The ending stocks to use ratio for the U.S. is a burdensome 50 percent for wheat with the world ratio at 28 percent.

I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on Northwest Aginfo Net.

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