Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Russian Wheat Facing Coldest Winter in Two Decades: Commodities

Russian Wheat Facing Coldest Winter in Two Decades
Wheat grain is held for display by a worker in Krasnodar, Russia. Photographer: Andrey Rudakov/Bloomberg

Russia, last year’s third-biggest wheat exporter, is bracing for its coldest winter in 20 years, threatening a crop planted into parched soil at a time when drought is already diminishing yields from Australia to the U.S.

The icy blasts predicted by the state weather forecaster through February are a greater threat this season because record heat in southern areas means some crops have yet to enter dormancy and don’t have a protective snow covering. Russia will already have the lowest stockpiles relative to demand in five years when it starts harvesting in July and a damaged crop would further curb supplies available for shipping.

Futures surged 31 percent this year as drought and heat waves buffeted Australia, southern Europe and the U.S. Farmers planted next year’s wheat into dry fields, leaving the U.S. crop in the worst condition in at least 27 years and prompting Australia’s state forecaster to cut its domestic output estimate Dec. 4. Prices will average $9 a bushel in the first quarter, 5.2 percent more than now and the most in five years, according to the median of seven analyst estimates compiled by Bloomberg.

“I can’t even remember when we last had temperatures this high,” said Alexander Rodin, a 62-year-old who farms about 500 acres in Russia’s southern Rostov region. “Farmers planted a lot into dry soil, so the emerging shoots are weak and thin and some seeds failed to sprout. The winter hasn’t started yet, and the crop outlook doesn’t look great already.”

Warmest Fall

Wheat averaged $7.5425 on the Chicago Board of Trade this year, headed for the second-highest annual average on record. The advances since the start of January make it the biggest gainer among the 24 commodities tracked by the Standard & Poor’s GSCI gauge, which fell 1.4 percent. The MSCI All-Country World Index of equities added 11 percent, and Treasuries returned 2.8 percent, a Bank of America Corp. index shows.

Russia had the fourth-warmest fall in data going back to 1891 and there were record temperatures in at least 10 central and southern cities in the past week, data from the Federal Hydrometeorological Center show. That’s been compounded by a lack of rain, with southern areas getting about 50 percent of the normal amount since September, according to Commodity Weather Group LLC, a researcher in Bethesda, Maryland. The south accounts for about 40 percent of the winter-wheat crop, it says.

Delaying Dormancy

The heat is delaying dormancy, which helps protect plants from freezes, and snowfall, with at least 10 centimeters (4.5 inches) needed to guard against damage, said David Streit, the senior forecaster for Commodity Weather Group. About 8 percent of plantings are already in a poor condition, about 2 points more than average, the state weather forecaster said Dec. 4 as it predicted the coldest winter in 20 years.

The supply crunch may be averted if the weather improves and as surging prices spur farmers to plant more crops, with Rabobank International forecasting a 9.3 percent gain in global output in the 2013-14 season. The bank expects a 37 percent expansion in output in the Black Sea region that includes Russia, while warning that “production risk remains high.”

Growth delayed during the Northern Hemisphere’s winter may be offset in the spring. There is a higher correlation between crop conditions in the spring and yields at harvest than there is with winter ratings, according to Macquarie Group Ltd.

“The crop is lost or made in the spring,” said Chris Gadd, an analyst at Macquarie in London. “There is no way the winter crop is perfect this year, and it’s a concern. But if you get establishment of the crop and it goes into dormancy without an absolute disaster then it’s all about spring.”

Global Costs

World food prices tracked by the United Nations dropped 11 percent from a record in February 2011 as lower costs for oils, fats and sugar offset the surge in grains. The Rome-based Food & Agriculture Organization says the global cost of food imports probably fell 10 percent to $1.136 trillion this year.

While winter wheat usually accounts for about two-thirds of Russia’s annual production, farmers can replant in the spring should crops wither during the colder months. Plantings in the south may also benefit from the rainfall in the first two weeks of December, according to Commodity Weather.

A “poor start” to the wheat crop in Northern Hemisphere means a rebound in production next season may be limited, depleting stockpiles further as demand is inelastic, Goldman Sachs Group Inc. said yesterday. It forecast Chicago wheat will rise to $9.50 a bushel in three months.

Southern District

As much as 12 percent of wheat in Russia’s Southern Federal district was weaker-than-average or failed to germinate and in the Northern Caucasus the rate was 17 percent, the state weather forecaster estimated as of Nov. 25. The areas accounted for 40 percent of national production last year, government data show.

As much as 15 percent of the combined grain crop may be destroyed this winter, implying production of 75 million to 80 million tons, from this year’s 71 million tons, IKAR estimates. Favorable weather may increase that to 85 million to 90 million tons, the Moscow-based research company predicts.

Russia banned grain exports in 2010 after drought decimated its crop and there is mounting concern that its neighbor Ukraine may stop shipping wheat as supplies dwindle. Kazakhstan, which also ships grains through the Black Sea, will probably ship 39 percent less this season, the USDA estimates.

“If we do see a shortfall in the Black Sea region and we also get a failure in the U.S. that leaves very few other avenues for wheat importers,” said Abah Ofon, an agricultural analyst at Standard Chartered Plc in Singapore who expects prices to average $9.20 in the first quarter.

U.S. Drought

Crop growth is also falling behind in the U.S., the biggest wheat shipper, with 26 percent of the crop in poor or very poor condition by Nov. 25, from 13 percent a year earlier, USDA data show. Farmers endured the worst drought in a half century this year, with about 56 percent of the six High Plains states from Kansas to North Dakota still in that condition by Nov. 20.

Australia, the second-biggest exporter, will produce 2.2 percent less than forecast in September, and 26 percent below last season’s record crop, the state-backed Abares forecasting agency said Dec. 4. Western Australia, the biggest producing region, had below-average rainfall throughout the Southern Hemisphere’s winter, data from the Bureau of Meteorology show.

Global production will drop 7.9 percent to 639.5 million metric tons this season, Rabobank predicts. That will leave stockpiles at 23.8 percent of consumption by June 30, from 29.4 percent a year earlier, the bank says. Russia will have 4.9 million tons left in inventory, or about 14 percent of demand, the lowest ratio since 2007-08, according to USDA estimates.

“By the end of the 2012-13 marketing year there will be precious little stocks anywhere in any major exporting country,” said Nick Higgins, an analyst at Rabobank in London. “It’s a further reduction in buffer stocks that are available if we have more supply shocks next year.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.