Wheat Boosted By Never-Ending Russian Export Curb Rumors
Investing.com | Aug 30, 2018 05:19
Markets, commodities included, hate the element of surprise. And few things have caught commodity markets off-guard this year like the on-again, off-again talk of plans by the world's third largest wheat producer, Russia, to curb grains shipments.
Each suggestion of supply tightness in wheat has lit a new flame under a crackling market that is already up 27 percent year-to-date. Sell-offs ensue when rumors are found to be untrue, before more gains come on fresh speculation, resulting in one of the most volatile times ever for prices of the staple.
Traders are sensitive to any hint of a Russian squeeze on grains supplies, after the country imposed a full ban back in 2010/11 following a severe drought, sending global prices surging.
With droughts now causing unexpected damage to wheat crops in European Baltic Sea countries and Australia, the market is on tenterhooks that a Russian export crisis could follow. There have been doubts about Russia’s capacity to meet its forecast for 35 million tonnes of wheat exports in 2018/19 due to an anticipated drop in production and brisk shipments since the start of the season.
h3 Russia Officially Denies Rumor/h3Even so, Russia’s agriculture ministry The Hueber Report on grains.
h3 Speculation Of Export Curbs Continues/h3“It would seem this is the third, or maybe fourth, time this story has been resurrected, which makes one almost think that where there is smoke, there could be an actual fire,” Hueber wrote, referring to the renewed speculation over Russian export restrictions.
“Of course, after one of the previous incarnations, exporters seemed to take the news to heart and appeared to really push as much product into the export channel for fear of being cut off later, which in turn resulted in the recent breakdown in prices.”
Commonwealth Bank analyst Tobin Gorey, in a report published August 21, said rumors about Russia’s wheat restrictions came from a number of sources. “One is simply that Russia has ‘form’ (or precedent), banning and taxing exports in the past when supplies have been skinny,” Gorey wrote.
h3 Export Estimates Barely Changed/h3“Two is that supplies are again slimming. Russia’s wheat production likely fell around 20 million tonnes in season 2018. And, even with considerably less exports, Russia’s wheat inventories are very likely to decline to low levels. Together, the two are fertile ground for such rumors.”
Despite the speculation, Hueber said Russian wheat export estimates for the current season had barely changed at 32.5 million metric tonnes, while overall crop estimates had been trimmed by a little over 1 MMT to 69.6 MMT.
While the country needed to balance its grains exports and serve domestic needs, Gorey said that for Russia to stop wheat exports now would be akin to “shooting themselves in the foot.” He conceded, however, that Moscow “may have a different view, come December or January.”
“We think there is a good chance this latest episode will not be the last of the Russian export rumors,” he added.
At Wednesday’s settlement of $5.4125 per bushel, wheat for December delivery on the Chicago Mercantile Exchange was deemed a “neutral” holding by Investing.com’s daily technicals.
We “have no illusions of grandeur, we are and remain bullish the wheat market longer term and will be looking for the current correction to breed a new smart money buy-signal to recommend purchases again,” said Shawn Hackett of Hackett Financial Advisors in Boca Raton, Florida. “For now, all we can do is be patient and wait for the timing to be right.”
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.