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Rain damage caused wheat price 'collapse' in central Russia

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Black Earth Farming laid bare the cost of crop damage to Russian farm revenue prospects - particularly in the central region where it operates, where prices "collapsed" thank to a glut of low specification grain.

The Russian farm operator, which controls 229,000 hectares of land, revealed that while rains had helped its wheat harvest achieve a company record of 4.3 tonnes per hectare, the persistence of rains into harvest time had badly hurt quality.

August and September precipitation had come in at double average levels, said the group, which operates in the Central Black Earth region which suffered particularly from harvest-time rains.

Indeed, the late rains – which encourage ripe kernels to sprout on the stalk, potentially leaving crop fit only for livestock feed – had decimated to 2% the proportion of its wheat harvest making benchmark class III export grade.

More than half the group's wheat crop was rated "unclassified".

'Prices soon collapsed'

Black Earth said flagged that in the Central Black Earth region harvest delays of some four weeks "caused sprouting resulting in quality quickly deteriorating reducing potential milling quality to unclassified wheat".

Black Earth Farming 2017 wheat crop breakdown by grade, and (average figure)

Class III: 2%, (20%)

Class IV: 20%, (29%)

Class V: 23%, (45%)

Unclassified: 6%, (54%)

"Prices soon collapsed as sellers discounted the feed price by as much as 40% in order to make sales of sprouted grain."

Prices tumble

With the extent of Russia's overall crop, at a record 30m tonnes, lending a blow to values of even better-quality wheat, Black Earth Farming revealed that class III wheat was worth only $151 a tonne in its region, a drop of one-third year on year.

Unclassified wheat was achieving just $75 a tonne – a slump of 45% year on year.

Indeed, the group's revenues for the July-to-September quarter, at $10.8m, fall to half those a year before, despite a more than doubling to 89,500 tonnes in sales volumes.

The group's average crop sales price in the period, at $77 per tonne, was down 46% year on year.

'Disappointing quarter'

The decline meant Black Earth Farming fell to an $8.5m loss for the period, compared with earnings of $2.2m a year before.

Central Black Earth wheat prices, by grade, and (year-on-year change)

Class III: $151 a tonne, (-33%)

Class IV: $138 a tonne, (-35%)

Class V: $129 a tonne, (-35%)

Unclassified: $75 a tonne, (-45%)

Sources: BEF, ProZerno

However, the group unveiled a decent start to its crops newly planted for the 2017 harvest.

The 44,000 hectares of winter wheat seeded as of early September were in "excellent condition", Mr Warburton said.

"The company has make good progress on cultivations" for the 2017 harvest, he said, adding that the mix of crops would be "broadly similar" year on year.

Black Earth Farming shares, which are listed in Stockholm, stood 2.0% lower at SEK5.00 in midday deals.

By Mike Verdin

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