October 05, 2020 | FBN Insights | Kevin McNew

Ag Markets Firm as Wheat Makes New Highs

Brazil dry, but forecast improves

Russian Grain Export Quota Possible 

  • Russia could provide details on a possible grain export quota for January-June 2021 at the next meeting with exporters mid-month. 
  • The size of the quota has not yet been officially stated, but would probably be close to the exportable surplus for the period.
  • The agriculture ministry did not reply to a Reuters' request for comment on the size or timing of a possible quota.
  • Reports have indicated the quota imposed could be 20 million tonnes of grain for the first half of next year.
  • SovEcon raised its projected 2020/21 Russian wheat exports to 38.9 million tonnes from 37.7 million previously and 34.8 million last year.
  • The agency projects January-June 2021 wheat exports at 15 million tonnes.
  • FBN’s Take On What It Means For The Farmer: Russia’s agricultural ministry could limit exportable supplies because they are sensitive to building inflation and higher domestic wheat prices. The coronavirus pandemic has been blamed for some of the problems but Russia historically has used this tool. Developing dryness in southern Russia is becoming a bigger concern for the planting and establishment of winter wheat for the 2021 harvest. For a quota to have much effect on prices, it would likely need to be well below 15 million tonnes for the January-June period. 


Brazil Dry, But Forecast Improves

  • IMEA reported that the current lack of rain could cause difficulties for the soy crop in Mato Grosso, Brazil's largest soy producing state.
  • As of last week, just 2% of the projected 2020/21 soy area in Mato Grosso had been planted. 
  • This compares to 7% for the same time last year,  and an average of 10% of planting completed.
  • Rainfall in the October 15-21 period is forecast to improve, but may still be below normal and that follows weeks of dryness.
  • The last week of October could be the best week of weather in the center west and center south crop areas.
  • FBN’s Take On What It Means For The Farmer: Dryness in Brazil is beginning to result in delayed planting, which could prolong the US export window if it continues. Longer term, the weather will continue to be a concern as the market is counting on record Brazilian production. Higher risk premiums will likely be supportive to prices. 


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