Wheat market has little to fear from possible Russian export ban

The Russian government was expected to meet today (Weds 3rd Dec) to discuss the introduction of wheat export restrictions. The 62% depreciation in the Russian rouble against the US dollar since the start of the year has resulted in Russian farmers being reluctant to sell wheat domestically, holding onto the grain as insurance as their currency plummets, resulting in higher domestic prices. Higher wheat prices are one factor contributing to higher consumer price inflation in Russia, reaching 8.3% in October.

Russia last imposed an export ban in late 2010 after a severe drought devastated crops risking domestic supplies. In contrast to 2010 the country has just had a bumper wheat crop of 104 million tonnes. However, concerns over the impact of cold weather and rising costs due to sanctions may see Russian output drop sharply in 2015.

Global wheat stocks are in a healthy position though, the International Grains Council predicting that global wheat stocks are predicted to grow by the end of the season compared with last year. Even if Russian exports do slow or come to a halt, Europe (the largest global supplier) is thought to have enough supply to be able to pick up any unfulfilled demand.

According to Rabobank wheat prices are forecast at $5.25 per bushel in Q4 2014 (over 10% down on current levels), rising to $5.60 per bushel by the end 2015. Its low case scenario sees wheat prices falling to around $5 per bushel by the end of 2015 – around 20% below current levels. In contrast, adverse weather and increased geopolitical risk in the Black Sea could push wheat prices as high as $7 per bushel.

Wheat prices (cents per bushel)

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