After not allowing grain to leave the country for almost 11 months, Russia is set re-open its export market July 1, bringing with it fears that some business will be lost in Canada and the U.S.
Russia has said it will begin exporting grain again on July 1.
“Last year’s crop was a historic disaster, and whatever they had left they had to keep for themselves,” said Tim Hannagan of PFG Best in Chicago.
The announcement is bearish to the market psychologically, he said, because it creates more competition for business in exporting countries such as Canada and the U.S. However, he said he believes the worst of the situation, in terms of North American prices, is over.
“Russia said ‘Sure, we will go along with the World Trade Organization and open up our door, but it doesn’t mean we are going to sell a whole lot,'” Hannagan said.
“They still have to produce a large chunk of grain to replenish stocks after last year. They won’t be a major supplier.”
The way it looks right now, he said, stocks will not be on the high end of the spectrum once again this year.
“This year’s production (in Russia) has to be much better, but they are not off to a good start, like a lot of other areas,” he said. “I wouldn’t expect to see a lot of selling out of there.”
Wheat values on the Chicago Board of Trade (CBOT) lost nearly eight per cent during the first two trading days of the week, but Hannagan said that the fact dry areas of the U.S. and Western Europe had received rains had just as big of a part to play in the decline as the opening of Russian exports did.
As of Wednesday’s close of trade, the nearby July wheat contract on the CBOT was trading at US$7.5925 per bushel.
Bruce Burnett of the Canadian Wheat Board agreed that there wouldn’t too big of a drop in price, because the market had been expecting this to happen.
“Most people assumed they were going to resume exports this year, so I think it will have a muted impact on prices,” Burnett said. “There are still some issues regarding how big their crop is, which will have a bigger impact on prices down the road.”