The market finally got the news it was seeking last Thursday when the Russian Prime Minister announced a ban on Russian wheat exports. The wheat market rallied limit up as buyers around the world sought to cover their positions.
But wheat futures moved limit down on Friday night after the Russian Government clarified its statement about wheat exports. All other grains moved either side of their Thursday close - evidence that the wheat market is acting independently of the other grains and largely on the Russian wheat market story.
The Russian government statements and the way the trade understand them can be all rather confusing. The intention is an export ban from Aug 15th to end Dec but now with the comment that the ban would be again discussed once the government knows final production. This leaves traders uncertain about whether existing contracts need to be met.
Egypt paid a premium over the weekend for French wheat of about US$20/t as a hedge against earlier Russian sales falling through. The French sales are being viewed as bearish, set at a level to prevent US wheat entering the market and indicating there are willing sellers in western Europe.
The market looks set to remain volatile until the Russian production situation is clarified. It seems production estimates are still very dynamic and to the downside. The Ukraine Prime Minister told news wires that its grain production would fall from 49mmt to 42-43mmt, while best estimates for Russia have production and exports down by around 30%.
Attention is also turning to the lack of moisture across Russia and the Ukraine for next planting and dry conditions in WA. Current wheat prices, if they are sustained will see a large shift in wheat plantings for next year, away from corn and soybeans. Rain in Europe and WA would see a big pullback in prices. If it remains dry for another month, there remains upside risk.