Reports of Russian export restrictions and tariffs on wheat have affected the grain market in recent weeks. The Ministry of Agriculture in Russia provided more clarity on Monday 3 September. There will be no barriers to exports, but it does keep a finger on the pulse. Are traders sufficiently reassured?
The potato market is experiencing overgrowth, the onion market is concerned about regrowth of onion plants and the grain market is considering possible Russian wheat export barriers. There were no real actions, but the rumors were enough to literally raise the price of wheat. The Ministry of Agriculture made more clear on Monday, September 3. As a result, the wheat market is slowing down.
Rumors as a basis
The Russian export position has been shadowing the grain market for weeks. It led to short-lived price increases on several occasions. Since they are completely based on the rumors and assumptions, it means that the price can drop quickly. The September contract for wheat on the Matif in Paris closed €3 lower at €0,75 per tonne on Monday 204 September. On Tuesday afternoon, September 4, the contract has to yield more and is at €200,50 per tonne.
The ministry says that the grain market in the Black Sea region is described as stable. As a result, it sees no reason to expect that significantly more wheat will suddenly be exported, so it will not intervene. This statement follows a consultation with exporters. The price in Russia for wheat FOB with 12,5% protein remains stable at around $225 per tonne (€195 per tonne). A weak exchange rate of the ruble makes grain from the region very attractive, with buyers mainly from the Middle East (Egypt).
The Ministry of Agriculture also announced that it is considering selling 1,5 million tons of grain from the country's total stocks. These stocks total 3,5 million tons. Of this, 500.000 tons are intended for export.
Wheat harvest is growing higher
According to government figures, the wheat harvest in Russia is at the same level as in 2017. 58,7 million tons of wheat have been harvested so far, compared to 67,8 million tons in 2017. If this trend is extended to the end of the harvest season, the total volume at 73 million tons. That is a reduction of 13%, but 3 million tons more than previously thought. Approximately 18 million hectares have now been harvested. Last year that was 17,7 million hectares.
Is an export ban completely out of the question? The 'bulls' don't think so. They are keeping their fingers crossed and expect that measures will still be taken in December. At the current export level, the limit of 30 million tons has been reached. It is logical that the ministry is now denying measures, so as not to bring about sharp price increases again. In the 2007/2008 season, Russia and Ukraine also limited wheat exports. About 2 years later (in 2010) it happened again. It brought about severe price increases.
(Text continues below the chart)The wheat contract (Matif) made up for a lot in week 35. The pressure is now increasing again.
Argentinian export tax
Since the beginning of August, Argentina has imposed a tax on the export of wheat and grain corn. This amounts to 10% of the sales price. This will cause grain exports to decrease. Reuters expects a declining corn area, with sowing starting next month. Farmers keep a close eye on the value of the peso.