The Wall Street Journal had a fairly extensive article in today's paper on the extension of the ban of wheat exports by Russia from December of this year until after next year's crop. However, as most traders and farmers know, you will believe what Russia says at your own risk. What we do know from the article is as follows:
- Wheat stockpiles are still much higher than in 2008, however, the original news of the Russia ban led to a 5% rally in food prices last month. Wheat rallied substantially, along with corn and sugar.
- Russia last year accounted for 14% of all wheat exports and if the ban continues to next year's crop, then this will drop to zero. The Ukraine and Kazakhstan will also have sharply reduced exports this year. During the the current 2009-2010 crop year, Russia exported about 650 million bushels up from 40 million bushels in 2000-01.
- A possibly bigger concern is that the winter wheat crop will not get planted if the drought continues. Normally, 44 million acres get planted to winter wheat and Russia right now assumes the worst case scenario for this year is closer to 2/3 of that number and that may be too high. If that is the case, even if the drought is lifted for next spring's crop, spring wheat normally produces less than winter wheat.
- Also, drought is hitting Argentina and Australia, and Germany had a wet season and the quality of their crop is way down. They have had to import wheat from the US which rarely happens.
- Egypt, which historically has not bought much wheat from the US, just struck deals to import about 8 million bushels at prices 5% higher than last month.
This is the second day in a row that the Wall Street Journal had an article on wheat exports and I think we will see several more over the next few months.