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Wheat prices in Europe are unchanged after hitting a two week high this week. As it is very trendy to blame Russia for everything at the moment, this one can be laid at its door step too.

Extreme dry weather in the south of the country is scorching the winter wheat crop while the spring wheat planted in Siberia and the Urals is suffering because of a late cold snap and wet weather.

Over the last few days a number of international and domestic agencies have been busy cutting their forecasts for the country’s wheat output this year which hit a record high of 83-85 million tonnes last year.

The US Department of Agriculture (USDA) reduced its estimates for the country’s crop this year by 3.5 million to 68.5 million tonnes. Russia’s domestic agencies are offering a wide range of forecasts with Russian Grain Union at the lowest predicting just 68-69 million tonnes of crop and analytical firm SovEcon at the top end predicting 73 million tonnes.

Separately, the US agency also reduced its estimate of the EU wheat crop by 1 million tonnes, bringing it in line with the European Commission’s estimates, but the USDA said that because of lower expected exports from Russia it will not lower its estimates for EU exports.

“Not only global production but also demand is expected to be somewhat lower than assumed a month ago, the anticipated market deficit remains unchanged at a good 6 million tonnes, as predicted in May,” says a report by Commerzbank.

That said, higher stocks at the beginning of this period mean that ending stocks will also be almost 2 million tonnes higher.

The grain trading association Coceral also slightly reduced its estimate of soft wheat production to 138.8 million tonnes due to drought-related cuts in Germany, Scandinavia, the Baltic states and Romania. This more than offset upward revisions for France and Spain. The 1% fall in the wheat price in Chicago was due to rainfall in West Australia where planting of winter wheat is coming to an end and conditions have likewise been too dry so far.

September wheat on Euronext is quoted at €181.50, down 2.0, CME EU wheat is unchanged at €159.25 and CME wheat was last quoted down 0.25 at $526.25.

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Vanya Dragomanovich

Vanya is an award-winning financial journalist who has worked in both television and newswires. She spent over 10 years at Dow Jones covering commodity markets, including metals, coffee, cocoa and oil. She also reported from the floor of the London Metals Exchange, and appeared on CNBC to discuss international metals markets. Since then she has written for several leading financial publications, including serving as commodities editor for FTSE Global Markets.

Vanya continues to cover international commodities markets globally, specialising in particular on metals and alternative energy. She is also the author of a book on CFD trading.

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