Rabobank downgraded its forecasts for Russia's wheat
harvest, and exports, in one of the first attempts by brokers to put numbers
onto damage from dryness which continued to send prices higher on Monday.
The bank cut its forecast for Russia's wheat production this
year by 2m tonnes to 53m tonnes, below the US Department of Agriculture's
forecast of a 56.0m-tonne harvest.
Rabobank also cut its estimate for Russia's wheat exports in
2012-13 to 15.5m tonnes, compared with a USDA forecast of 18.0m tonnes – and
warned that further downgrades may be on the way, thanks to "escalating
production concerns" in the region.
|Wheat prices as of 17:45 UK time|
Chicago: $7.08 ½ a bushel, +1.9%
Kansas: $7.19 ¾ a bushel, +2.1%
Paris: E216.50 a tonne, (+0.6%)
London: £160.45 a tonne, (+1.0%)
"Overwhelmingly dry conditions across the southern
Russian wheat growing region leaves the crop at risk of a substantial downgrade
and, importantly, threatens to tighten the world's exportable wheat
surplus," the bank said.
"While it is getting late in the crop's agronomic
development to see major yield downgrades, the forecast continues to look dry,
and further crop damage is a risk."
The comments, which follow a caution earlier on Monday from
Black Earth Farming over Russian dryness, came as Rabobank edged higher – a
little – its forecasts for wheat prices.
The estimate for average Chicago wheat prices in the
current, April-to-June quarter was nudged up $0.10 a bushel to $6.40 a bushel.
Wheat's firm downward trend until the last few days
"suggests it may be difficult to sustain upward momentum, with any rallies
being followed by a strong sell-off and we expect further bullish fundamental
news will be needed to break this bearish range".
And, indeed, Chicago's July wheat contract, having soared
3.8% to $7.22 a bushel in early deals, briefly retreated into negative
territory as weather forecasts added rain into the Russian outlook.
"A wetter outlook for the former Soviet Union in the
overnight weather models inspired profit-taking, with the Chicago wheat market
some 30-cents a bushel off the highs of the session," US broker Benson
Quinn Commodities said.
However, prices revived amid talk, that Agrimoney.com has been
unable to verify, of fires in wheat-growing areas of Russia.
"Forest fires now being reported as being widespread in
the dry areas of the Russian wheat country, this is the similar to the pattern
that was established in 2007-08. and why the trade is so nervous about wheat
production now," Mike O'Dea at FCStone said.
Furthermore, traders logged continued concerns about dryness
in China and the US,
In the US, "the weather has turned warm and dry and is
now stealing yield potential", US Commodities said.
"The central and western plains will be very hot this
week. Kansas, South Dakota and Nebraska
will all have temperatures that approaches or moves over 100 degrees