FUTURES markets last Thursday night choked on unexpected news, and traded lower in a  3-5 per cent (pc) range across several commodities as the August world agricultural supply and demand estimates (WASDE) report from the United States Department of Agriculture (USDA) forecast yet another record Russian wheat crop.

Even though smaller crop estimates in Australia, EU, US and Canada are now familiar to producers and traders, the headline was grabbed by the Eastern bloc.

USDA said increased production from Former Soviet Union (FSU) nations including Russia, Kazakhstan and Ukraine had more than offset reduced production forecasts in Canada, EU and US; table 1.

source : USDA

Some sentences from the report explain why:

“Global 2017/18 wheat supplies increased significantly, primarily on an 8.6 million tonne (Mt) production increase in the Former Soviet Union (FSU).

“Russian production is a record 77.5Mt, surpassing last year’s record by 5Mt.

“Winter wheat yields are forecast higher for both Russia and Ukraine, based mainly on harvest results to date.

“Additionally, spring wheat conditions have remained very favourable for both Russia and Kazakhstan, resulting in higher production forecasts.

“Canadian wheat production is reduced 1.9Mt to 26.5Mt on the increasing intensification of drought conditions in major production areas of the Prairie Provinces.”

Russia’s winter wheat crop is mostly in the bin now so, pending a good outcome for the harvest of the spring crop next month, shipping an additional 3Mt FSU wheat, between Russia, Kazakhstan and Ukraine, to world markets was seen likely.

Australian and FSU wheat competes for markets such as Indonesia, Thailand and The Philippines.

USDA held its forecast of Australia’s 2017 wheat crop at 23.5Mt, unchanged from its July estimate.  Australia’s 2016 crop was 35.11Mt according to USDA.