The little big man in the Kremlin knows how to make his mark on the wheat market. Possible trade or export restrictions drove up prices before the weekend and that upward trend does not seem to be taking effect immediately. North Africa has always been an important market for Black Sea grain exporters, but the EU is now gaining a foothold in some of these African countries.
Last Friday, wheat prices took a big step upwards. In the first hours of this trading session, wheat prices on both the CBoT and the Matif showed a downward correction. That mood has now changed and in both Paris and Chicago wheat is up several tenths of a percentage point at the time of writing this article. Soya is also showing a cautious plus on the American stock exchange, while corn contracts for the old harvest are turning slightly red.
Russia manages to surprise the wheat market time and time again. While an ample supply of relatively cheap wheat previously put significant pressure on prices, the Kremlin allowed the price to bounce back just as easily on Friday. The Russian newspaper Vedomosti revealed that Russia was planning to impose an export ban on wheat. This was later refuted by the Russian Ministry of Agriculture. Yet there appears to be a grain of truth in Vedomosti's story. Various sources report that Russia wants to keep the wheat price at such a level that the price is sufficient to cover the cultivation costs for the farmer. Exporters would therefore not receive the phytosanitary certificates required for export from the Russian authorities if they sold wheat below $275 per tonne.
Lower price, more exports
Market agency Ikar's quote for wheat delivered to the Black Sea region fell by $5 last week to $272 per tonne. For the short term, Ikar calls the market trend neutral to downward. Russia's export restrictions would push the market in the other direction, but Ikar does not think it is likely that Russia will succeed in putting its money where its mouth is. The other generally well-established market agency Sovecon comes to more or less the same conclusion in its weekly commentary. In the short term, Russia has managed to instill some fear in the market, but over a longer period there is not much to worry about. Exports from Russia picked up somewhat last week. In the week to March 24, Russia exported 1,16 million tons of grain. Of this, 970.000 tons were wheat, which is 100.000 more than a week earlier.
Wheat from the EU is especially popular in North Africa, according to export data from the European Commission. Morocco has imported more than 20 million tons of wheat from the EU this season until March 3,5, making it the largest customer for European wheat. Morocco took almost four times as much so far this season than they did in the same period last season. Algeria imported slightly less last season, at 3,1 million tons. Egypt, which wants to become less dependent on the Black Sea region for its grain supply, does not appear to have sought refuge in European wheat. The country has imported 1,6 million tons of wheat so far this season. A year earlier this was still 2,1 million tons.