THE drought in Russia is expected to have flow-on effects to wheat exports from neighbouring states, potentially removing competition from the global market.
German grain trader Toepfer International said, with crop failure in Russia and, to a lesser degree Kazakhstan and The Ukraine, Russian authorities were putting pressure on the Kazakh Government to limit wheat sales on the global market.
The move indicates the dire grain supply situation in Russia - especially with the country building up its livestock sector in recent years - and may provide opportunities for Australian exports.
In its August market review, Toepfer said the Russian Government was so concerned about its domestic supplies, it was urging Kazakhstan to also limit exports.
"If Kazakhstan does not impose its own export measures, it is possible that Russia might make the transit of grain for Kazakhstan through Russian territory more difficult by increasing the transit fee or by refusing to provide rail cars," Toepfer said.
It said the Ukrainian Government had responded to the drought by delaying exports of wheat and barley.
The Ukraine was making administrative procedures for export grain more complicated to frustrate shipping out of its ports.
Toepfer said all Russian grain-growing regions except for the south of the country had not had any significant rain for four months.
"Since temperatures during the same time period regularly exceeded 30C and have temporarily even exceeded 40C over the past three weeks, several million hectares have simply dried up and will not produce any yield, especially in the Volga Region, but also in parts of the central Russian region," Toepfer said.
"The USDA also believes that the harvest of the spring grains oats and corn, which are almost exclusively used for feed, will also be relatively poor.
"The use of wheat for feed and ultimately the entire Russian wheat use is expected to rise compared to the previous year.
"This should tighten the Russian supply situation even further."
Wheat production in the three countries - Russia, Kazakhstan and The Ukraine - accounted for about 100 million tonnes, or about 15 per cent of the world crop, in recent years.
But this year, it is expected to slump to about 73.5 million tonnes, according to the US Department of Agriculture.
During the past two years, the three countries exported about 36-37 million tonnes of wheat, but this season, that is expected to fall to 15 million tonnes.
Although Australia does not compete directly with Russian wheat, the drought in that region should impact on global wheat supplies, potentially opening up more exports of local wheat.
The latest figures by the Australian Bureau of Statistics indicate local bulk handlers should start the new grain season with about 5.1 million tonnes of wheat carried over from last harvest - and possibly lower if the Russian grain shortage affects markets.
