Black Sea region. What is to be expected of the August USDA forecast

Today, August 10, the USDA will publish a new forecast for 2018 grain production. We expect this USDA report to appreciably adjust the forecasts for the Black Sea grain market.

In the opinion of UkrAgroConsult, the most substantial changes will likely concern the wheat market. The July USDA forecast for wheat production in Ukraine at 25.5 MMT seems overestimated to us. In the August forecast, the USDA is expected to reduce the Ukrainian wheat crop by at least 0.5 MMT due to heavier losses while harvesting. In our opinion, Ukraine’s 2018/19 wheat export potential of 16.5 MMT is also to be revised downward, on average by 0.5-1 MMT.

The situation in forecasting the Russian wheat crop is exactly the opposite. In the opinion of UkrAgroConsult, the USDA figures for Russia’s wheat harvest acreage are underestimated. The USDA based its forecast on a harvest area of 25.5 Ml ha, whereas 27.25 Ml ha had been planted officially. Thus, supposed area losses total some 6.5% - this looks overestimated even with respect to this year’s weather conditions. Consequently, the USDA forecast for Russia’s wheat crop at 67 MMT may be underestimated. It is not ruled out that USDA experts will not revise their current forecast until the wheat harvest advances to the east of Russia.

Any changes concerning Ukraine’s barley market are unlikely. In Russia, like in the case of wheat, the harvest area of barley looks somewhat uderestimated. If it is revised, the crop forecast could be raised from the previous estimate of 17 MMT.

We do not expect this report to bring any substantial changes in the corn estimates, though the figure of 12 MMT for the Russian crop seems overestimated, taking into account drought weather in key corn growing regions. UkrAgroConsult believes this year’s corn yield in Russia will be lower than in 2017, whereas the USDA applies last year’s value to the country.