Wheat markets have seen strong upward movements in recent weeks due to challenging weather in Russia, the main global exporter of the grain. As a result, some relevant questions have arisen in the market: is there further room for deterioration in the Russian crop? Has the market fully priced in the reduction in supply in the country?
Russia - Observed rainfall (% of normal) - Last 60 days 
Unusual frost events in early May affected regions in the Central, Southern and Volga Districts, decreasing yield potential and introducing a federal emergency regime under which farmers will receive insurance compensation for crop losses. According to the Russian Grain Union, 1.5M ha of areas sown with grain were affected by the late frost.
Russia - Average Temperature Deviation from Normal (ºC) - Last 30 days
Emergency mode has been introduced in Lipetsk, Tambov, Voronezh and Volgograd, as these Oblasts have suffered the most. In addition, the risk of drought remains in the southern, central and northern districts of the Caucasus, resulting in low levels of soil moisture and low yield potential for winter wheat. Considering recent and expected weather conditions, we have lowered our harvested area estimate to 15.5M ha of winter wheat and 12.7M ha of spring wheat.
Soil moisture in the root zone of Southern Russia (% within the top 1 meter) 
According to the latest weather forecasts, the hottest weather will occur in the South and North Caucasus districts, with occasional rain in early June in the Central and Volga districts. Long-term weather forecasts predict hot and dry conditions during the months of June to August in the Southern, Volga and Central districts, which, if verified, could further reduce the yield potential of winter wheat.
In addition to all the problems with the winter crop, local players and agencies have reported a delay in planting the spring crop in Siberia, increasing the risk of lower yields in the region. Currently, private estimates for Russia's total wheat production are hovering between 80M mt and 85M mt, but we understand that these figures are still slightly optimistic.
With the impact of the frosts, the very low soil moisture and expectations of still very dry weather in the coming days - not to mention the growing risks for the spring harvest - we believe that a harvest above 80M mt and a yield above 3 mt/ha is very difficult to achieve. As a result, our current estimate for Russia's total production is 79.2M mt.
Russia - Precipitation anomaly - Next 15 days (in/day of normal) 
Production, Harvested Area and Yield - Wheat Russia (M mt, M ha, mt/ha) 
Source: USDA. *Hedgepoint estimate.
Despite the strong reaction of the wheat markets to the drop in Russia's production estimates, further upward movements can still be expected in the short and medium term, as we understand that other consultancies are likely to cut their figures in the coming days and the adjustment in the next USDA report (to be released next week) should show an even tighter global balance.
However, it's important to note that on Euronext, speculative funds long positions are close to the highs of the last 5 years, leaving little room for significant rises. The situation is different for US contracts, with positioning in Kansas close to the lows of the same period. If Chicago and Kansas respond more to the tightening of the global balance in the coming weeks, there is room for strong appreciation.
Net position of Investment Funds - Euronext Wheat (contracts) 
Money Managers Net Position - HRW Kansas Wheat (contracts) 
