Russia, India set to spark major swing in global wheat balance

The slippage of available global wheat supplies to multi-decade lows has been a repetitive theme for severalyears, though the reality has yet to pan out as tightly as originally feared.

However, this season’s combination of Russian crop losses and impending Indian imports alone could be enough to trigger that decline and support global wheat prices.

On Tuesday, Russian consultancy Sovecon cut its 2024-25 harvest estimate for the top wheat exporter to 82.1 million metric tons from 85.7 million previously. That followed IKAR’s reduction on Monday to 81.5 million tons from 83.5 million, well below Russia’s previous harvest of 92.8 million tons and its record 2022-23 crop of around 104 million.

Those analysts in March had forecast Russia’s 2024-25 wheat output as high as 93 million to 94 million tons, meaning the crop has lost around 12 million tons or 13% of production potential thus far. That is largely due to extremely dry spring weather and most recently, frost damage.

Meanwhile, second-largest wheat consumer India is likely to scrap wheat import duties after June due to low state reserves, potentially spurring imports this year between 3 million and 5 million tons from just 120,000 tons a year earlier.

The Russian shortfall and India’s potential imports put a dent as large as 17 million tons in available global wheat supplies versus initial ideas. For reference, that is worth about 8% of the U.S. Department of Agriculture’s 2024-25 world wheat export forecast.

USDA pegs Egypt as the largest wheat importer in 2024-25 at 12 million tons, and India importing 5 million tons would designate it the No. 12 importer, similar to the hauls of Japan or Nigeria.

India’s last significant wheat import volume, 6 million tons, came in 2016-17, though the country’s sometimes-exporter status makes it a swing factor for global wheat trade. In 2021-22, India exported a record 8 million tons as both domestic supplies and global wheat prices were high.

SUPPLY CONTRACTION

USDA’s initial 2024-25 outlooks published earlier this month implied global wheat stocks-to-use among major exporters would fall to a 17-year low of 13.5% from 14.7% in the previous marketing year.

However, USDA projects virtually no wheat imports for India and its Russian crop peg of 88 million tons is well above recent analyst estimates, so the agency’s implied stocks-to-use could tighten further.

USDA’s Russian wheat estimate does not include the peninsula of Crimea, which produced 1.3 million tons in 2023-24. That essentially puts estimates from USDA and the Russian consultancies even further apart than it appears, though for USDA’s methodology, Ukraine includes Crimean production.

Often, a notable yearly increase or decrease in exporter stocks-to-use follows a large increase or decrease in wheat production in the previous season. For example, wheat production among top exporters fell 7% in 2018-19, but the larger drop in stocks-to-use came in 2019-20.

This supports a more substantial stocks-to-use decline in 2024-25 given that exporter production fell more than 3% in 2023-24, the largest drop since 2018-19. But this also depends on other factors including global output and trade of corn, which sometimes competes with wheat.

Most-active Chicago wheat futures Wv1 fell 1.7% on Thursday, down more than 5% from Tuesday’s high on hopes that more favorable weather could pause Russian losses. But global wheat demand may be supported in the coming months as global buyers are under-covered.

Tags: Russia, wheat, India, crop forecast