The market opened quietly awaiting  the outcome of talks in Russia over grain stocks and the future of exports. The outcome of the meeting was confirmation of their reduced output but the much-expected limits on exports was not forthcoming. A worthwhile point to note was that Deputy Prime Minister, Arkady Dvorkovich, said, “As long as I am in charge of the sector, I will be against export restrictions.” A cynic might view this as an opportunity to U-turn should he be removed from office at some point in the future! The agriculture minister estimated an exportable surplus of grains in the range of 10 – 14 mmt, stating that domestic requirements would be fully met despite the lack of restrictions.

Despite the announcement it seems hard to contemplate a situation where Russia, and in turn Ukraine, will not intervene at some future point to protect their dwindling stockpile and avoid becoming an importer later this season.

The CBOT wheat market dipped on the news and has fallen back again this afternoon; in total some $0.20.bu has come off values basis Dec ’12 futures. It must be remembered that markets have not only the lack of export restrictions to handle today but also a month end which traditionally sees short term trend reversal as funds withdraw cash to pay out investors, rebalancing positions; finally there is an element of “risk-off” as the US heads into its extended Labor Day weekend break. We would not be surprised to see some of the dip recovered when trading resumes on Tuesday, nothing has really changed – maybe timing needs to be tweaked.

DEFRA has reported end June grain stocks in the UK, and as expected, levels are lower than in previous years. Add to this the harvest delays and we can clearly see the supply issues which have been experienced are understandable if not welcome.

Falling yields in Russia and Ukraine have led to growers withholding their reduced output back awaiting improved prices before committing to sales. Whilst prices may have risen some 47% in Chicago, the reality in Russia for growers is merely 25% and Ukraine is worse at 9% higher. Little wonder then that growers await better levels before making sales!

The weather is forecast to improve somewhat over the weekend, hopefully allowing growers to get back into fields and make some serious inroads into harvest and alleviate some of the supply issues we have been experiencing.