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Concerns about lower Russian grain supply lift wheat price



Commerzbank commodities research

Commerzbank commoditiesThe wheat price in Chicago has recovered from the setback it suffered when the latest forecasts from the US Department of Agriculture (USDA) were published mid-last week. As was briefly the case at the beginning of the month, wheat is now trading back above the 600 US cents per bushel mark. Although the USDA estimates global wheat stocks at the end of the current 2014/15 crop year to be 2 million tons higher than it did before, many market participants are concerned about the current situation in Russia. At the end of last week, the country’s agricultural minister once again talked about the desire to reduce grain exports – though he explicitly ruled out any ban, saying that such a measure would contravene WTO regulations, a member of which Russia now is. One possible alternative that is being discussed is to increase prices set by the state when grain is sold to state warehouses so as to make shipments abroad less attractive. Russia‘s exports are in full swing following a good grain crop, because the weak rouble makes the grain particularly competitive and thus attractive for vendors to export. It would appear that the government is worried that declining stocks could significantly drive up domestic prices for flour. The situation is exacerbated by the fact that the outlook for the 2015 crop is critical at present on account of the overly cold and dry weather. Current CFTC data show that a majority of short-term-oriented market participants is now betting on further climbing wheat prices for the first time since the early summer.

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