By Joanna Newman
WHEN Russia finally made its formal request to the USA for food aid this week, the wheat market scarcely reacted.
Rumours of grain exports to Russia have circulated for several weeks and the US market had already risen to reflect the hopes of an export outlet for American wheat.
Many analysts argue that the federal Government is playing up subsidy and food aid stories in order to boost wheat prices for farmers before next weeks national elections. The market is cautiously waiting to see what quantities of wheat will be promised to Russia after the elections, before reacting to the latest news.
There are plenty of politically-motivated initiatives in the wheat market to help prices ahead of the elections. Under the Loan Deficiency Program (LDP) of farming subsidies, the federal Government is about to pay out $2.86 billion to wheat producers to make up their losses.
The extra cash will buy time for the farmers and reduce the urgency of selling their crop to pay off their operating loans. This could reduce short-term supply in the market, thereby supporting prices, but could result in extra product hitting the market next year.
On the Chicago Board of Trade, the December futures contract closed on Tuesday, 27 October at 295.2¢/bushel, compared with 286.2¢/bushel a week ago.