- European wheat prices rose on Monday as dealers covered short positions after reports Russia is considering increasing its grain export restrictions. Front month March wheat in Paris unofficially closed up €3.00 or 1.8% at €167.25/mt, the day’s high. Russia’s Agriculture Ministry is considering toughening grain export limits and imposing tougher restrictions until new crops arrive for sale this summer, the Interfax news agency reported on Monday. The aim is to cool Russian internal market prices. Reuters could not confirm the report. Russia already has an export tax on wheat but despite the duty, the country’s grain exports hit a record in December due to the weaker rouble. The picture in Russia remained blurred, leading to a risk-off mood among market participants. However the report about possible additional restrictions on Russian exports prompted some dealers to cover short positions, traders said. “Export restrictions by Russia, which dominates the export market, would change the story but it has yet to be confirmed,” a trader said. Russia is a major rival to France in wheat export markets. The downward trend in Paris wheat prices since early November meant some export competitiveness had been regained but international demand is still weak, another trader said. German cash premiums in Hamburg were cut to compensate for the strength in Paris, with buyers declining to accept price rises. Standard wheat with 12% protein content for February delivery was offered for sale at €2.50 under the Paris March contract against €3.50 under on Friday. Bids were generally €3.00 under Paris futures.
- Chicago markets were described as slow and two sided with rallies being capped by selling pressure. Favourable S America weather and ongoing lacklustre US demand, as well as the likelihood of growing US end stocks, look as if significant price gains remain unlikely. Wheat was higher on the latest Russian rumour. No confirmation on the rumour has been offered and differing opinions have been expressed by Russian ag deputies on the subject. A Russian economics ministry meeting will be held later this week. We have heard that wheat export duties could be on the agenda due to rising domestic food inflation rates. However, no outright ban on Russian wheat exports is being contemplated amid the abundance of Russian wheat/grain. We struggle to believe that any sizeable export duty will be placed and the wheat export duty rumours are tied to the falling Ruble and its impact on a host of consumer goods within Russia.
- There has been considerable talk about rising domestic Brazilian corn prices and their record large corn export program. We have no hard evidence that Brazil is planning to shift or default on corn export commitments due to their short term rising prices. In fact, talk is ongoing that Brazil could release another package of government stored corn (they did 500,000 mt last week) to help their livestock producer. Moreover, their first corn harvest will start in just two or three weeks and this new supply will afford a fresh supply of corn as exporters shift their focus to soybeans. We don’t expect that Brazil will move to alter their corn export program with their cash corn market to likely to peak in the next 10 days.
- US farmers are citing that grain and soybean prices are cheap. Yet, Russian, Brazilian and Canadian farmers would suggest that their domestic prices are high? It is the value of the US$ that continues to play a heightened role in stimulating world agriculture production. The 2016 grain markets are different insofar as the Black Sea is the world’s leading wheat exporter and S America is the world’s leading soybean exporter. This places huge pressure squarely back on the US and Chicago. As US export and crush demand estimates wilt, so will prices with time!