Wheat market firmer on Russia export ban extension

Grain futures rose again today (Friday, 3 September) on news that Russia is extending its grain export ban beyond next year’s harvest.

London November 2010 wheat futures hit £160.50/t delivered by the close of the market.

German farm ministry figures estimating a 12% fall in the size of its 2010 grain harvest added to the firmness. A heatwave in early summer, followed by prolonged heavy rainfall at harvest will bring the crop down to 43.8m tonnes, with the effect of the rain also reducing wheat quality and in particular milling wheat export availability.

Germany’s wheat crop is down 5% while barley is 14% lower than 2009 and oilseed rape output is expected to be down by 9.3%.

World wheat stocks at about 194m tonnes remain very high, so there is in theory more than enough wheat to go round, say traders. However, these stocks are mostly held in China, Russia, other former Soviet Union, India, the USA and North Africa.

Russia’s withdrawal from the export market has caused its traditional grain customers to have to switch rapidly to other sources, exaggerating regional shortages in a difficult harvest where quality and supply fears have been magnified, hence the volatility. This means that French wheat exports, like those from the UK, are progressing rapidly.

“By Christmas there are reasonable expectations that France will have exported 7-8m tonnes out of a surplus of 9.5m tonnes,” said Gleadell in its weekly market report.

A further large vessel is expected in Southampton later this month once the current one is loaded. The firm expects exports from the English south coast and lower west coast will be mainly of feed wheat this season while wheat quality in the east will enable quality wheat exports to provide a constant and attractive market for growers.

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