INTERVIEW: Dry weather raises concern for Russian grain harvest, Rusgrain Union head says

The drought situation developing in Russia's Southern, Central federal districts and the Volga region, the country's key grain-growing areas, could greatly affect the further development of the crop, the head of the Russian Union of Grain Exporters told S&P Global Commodity Insights.

"If there is no rain in the near future, the harvest situation will worsen significantly," Rusgrain Union's Eduard Zernin said in a recent interview. "Perhaps this will be a trigger for a revision of the official agriculture ministry forecast."

Prolonged dry weather in Russia and unseasonal frosts in May caused significant damage to grain crops with "about 1 million hectares of dead and 700,000 hectares of damaged crops" assessed, Zernin said.

This resulted in several forecast agencies and market analysts revising down their marketing year 2024-25 (July-June) estimates. However, Russia's agriculture ministry kept its grain harvest forecast for MY 2024-25 unchanged at 132 million mt.

"The situation will become clear when the harvesting campaign begins in the affected regions," Zernin said. "We believe that until this moment the agriculture ministry will not change the official forecast and assessment of export potential, so as not to disturb the grain market, which is already heated up by bloggers and market participants."

Rusgrain Union estimates Russia's MY 2024-25 grain harvest at 125.4 million mt, including 79.5 million mt of wheat, while grain exports are expected to reach 54 million mt, including 40.2 million mt of wheat. The group's corn harvest estimate for MY 2024-25 is 15 million mt, with exports forecast at 5 million mt.

Russian grain exports are expected to increase in June, Zernin said.

"Russian exporters still have a quota of 5 million mt of grain," he said. "They will try to export before the end of the season to not fall under restrictions in the next one."

Earlier in April, the Russian government introduced an additional quota of 5 million mt of grain, including wheat and corn, to the quota of 24 million mt in force from Feb. 15 to June 30 for exports.

Replanting choices

After frosts in May damaged crops, Russian agriculture minister Oksana Lut said farmers would need to replant damaged crops on 500,000 hectares. While reseeding is almost complete, the main issue is not the timing of replanting, but the crops that are being planted, Zernin said.

Rusgrain Union estimates that oilseeds, not wheat, became the main reseeding crop, Zernin said.

"Farmers are more likely to choose sunflower and corn, which are more suitable for agricultural timing, than wheat," he said. Rusgrain Union also cut its grain harvest forecast because of farmers' preference for reseeding oilseeds over wheat, he added.

For spring crops, sowing is 95% complete, continuing in the Urals and Siberia, Zernin said.

Turkish, EU restrictions

Turkey's agriculture ministry June 6announced a ban on wheat imports from June 21 until Oct. 15 to protect producers from price fluctuations.

Market sources expect this ban will have a direct impact on Russia's exports as the country supplies 60%-75% of Turkey's wheat imports and it comes into effect just as Russia's new crop needs to be marketed.

However, Zernin said he was not concerned about this closed export destination, suggesting Turkey's move could stimulate the development of the flour milling industry in Russia and tighten competition in target markets for Turkish flour.

The EU has also imposed import tariffs on Russian and Belarusian grain(opens in a new tab). In a recent development, the EU countries greenlighted a sharp increase in tariffs on grain imports from the two countries.

"EU restrictions, which are greatly overestimated, will not actually affect the export of Russian grain, and will rather harm European food and feed producers," Zernin said. "Much more dangerous for global food security is the blocking of payments for Russian agricultural products, which has accelerated in recent week," he added, again referring to EU sanctions.