Grain dries on the world market – Newspaper Kommersant No. 152 (7353) of 08/22/2022

The food situation, despite the mitigation of the crisis with exports from Ukraine, remains tense due to extremely high temperatures in many regions, follows from the August forecast of the US Department of Agriculture. A wave of droughts threatens to lose a sixth of the corn crop in the EU, and losses around the world could amount to almost 40 million tons, which is more than 3% of its world production. The most significant decline in production is in sunflower: its yield will decrease by 6 million tons, or 11%. Wheat will not be affected as much. The fall in crops in the EU and India will be compensated by its growth in Canada and Russia, but this will rather add problems to the agro-industrial complex of the Russian Federation: export restrictions will cause a drop in domestic prices and the profitability of grain production.

Analysts at the US Department of Agriculture in the August update of the forecast noted that the food situation, despite the resumption of exports from Ukraine, remains tense against the backdrop of extremely high temperatures. The forecast shows that a wave of droughts in Spain, Southern France, Italy and the Balkans and irrigation restrictions in producing areas will lead to the loss of a sixth of the EU corn crop in the 2022/23 season. Globally, losses could amount to almost 40 million tons, equivalent to more than 3% of world corn production. The reasons are a drop in crops in the United States by almost 20 million tons and in Ukraine by 12 million tons, while an increase of 10 million tons in Brazil only compensates for the loss of European corn.

The sunflower seed crop will decrease by about 6 million tons (about 11% of total production), mainly due to a decrease in the crop in Ukraine by 8 million tons. In the Russian Federation, on the contrary, against the backdrop of favorable weather in the Central Federal District, the collection will increase by 9%, to 17 million tons.

The decline in the rice harvest, according to the US Department of Agriculture, will be insignificant, since its decrease in India by 1 million tons will be offset by growth in Southeast Asia. However, the president of the All India Rice Exporters Association, Krishna Rao, predicts a more significant drop in the production of this crop in the country – by 10 million tons, or 8% compared to the last agricultural year, and the UN FAO notes weather risks for China and Bangladesh.

Wheat will not be hit as hard: a total yield drop of 40 million tons in the EU, India, Argentina, Australia, Morocco and Ukraine will be offset by an increase in Canada and the Russian Federation by 13 million tons in each country and in the USA by 4 million tons, as well as slight increase in China and the Middle East. The forecast for Russia has been raised to a record 88 million tons (81 million tons was predicted a month ago), which is 17% more than in the 2021/22 agricultural year (more than 75 million tons). Andrei Sizov, director of the Sovecon analytical center, however, believes that the American forecast, even after upward revision, is too low: according to the center, wheat harvest in Russia will amount to almost 95 million tons. At the same time, wheat exports in August will amount to only 3.5-3.6 million tons, which is 20% lower than the average (in August 2021 – more than 5 million tons). The export window will close in November with the onset of storms in the Black Sea. There is little time left for export shipments, and according to Sovecon, for the first time since 2017, farmers no longer have enough space to store grain, despite the fact that record harvests of sunflower seeds and corn are also expected. The head of Sovecon notes that the situation may worsen until the problem of high export duties is resolved.

Georgy Smirnov