The News & What it Means – No Wheat Export Curb for Russia, but Opportunity Remains

By John DePutter & Dave Milne – September 4, 2018


The news:

“Russia’s Agriculture Ministry does not see a need to impose an export duty on grains or to curb grain exports in any other way, it said in a statement after a meeting with exporters on Monday.”

– Reuters, Sept. 3, 2018


What it means:

The situation in Russia can always change, but even if accurate, the lack of an export curb should not have a long-lasting bearish influence on US and Canadian wheat prices.


As most market watchers will know, the possibility of a limit on Russian exports helped to provide a lift to wheat futures over the past couple of weeks. The idea was that if Russia limited its exports, there would be more international demand for American supplies.


Portions of the Russian grain belt were overly dry this year, with production currently forecast by the USDA to drop to 68 million tonnes, a steep decline of 20% from the record-breaking 2017 Russian crop of 85 million. Even with this year’s decline, Russian production remains big compared to the previous five years, but the Reuters article noted there was still pressure on the government from those regions particularly hard-hit by the dry weather for some form of export limit.


Indeed, with the Russian government denying any curb on shipments, wheat futures fell sharply on Tuesday. The benchmark December Chicago contract was down around 20 cents near the noon hour.



Still hope

But even if Russia exports the full 35 million tonnes of wheat expected by the USDA in 2018-19, there still figures to be at least some extra wheat export business for the US.


The European Commission recently reduced its 2018 EU wheat production estimate by 4.7 million tonnes from July to 128.8 million tonnes, with projected exports cut by 5.5 million tonnes to 20 million – far below the USDA’s August estimate of 23 million and the previous year’s 23.5 million.


Meanwhile, last week’s Statistics Canada production report pegged this year’s Canadian wheat crop below expectations at 28.98 million tonnes, down about 1 million or 3.3% from the 2017 crop of 29.98 million and the smallest since 27.64 million in 2015.


The upshot is that with world wheat production expected down this year, there will still be plenty of opportunity in the export market, even if the news from Russia is a negative in the shorter term.


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