We’ve already seen the Russians change the renegotiation period of the grain deal from 120 days to 60 days, leaving some experts to speculate Russia may not resign in the future. Now there’s questions about whether Russia will temporarily halt wheat and sunflower exports after a sharp drop in global prices in recent weeks and conflicting stories on Friday.
Early reports indicated Russia’s ag ministry would meet with industry officials to discuss a temporary ban on exports. But later Russia refuted that saying instead of halting exports, they were raising the export tax $70 a ton starting this week. This pushed wheat markets higher, but market analysts say it’s just Russia’s latest head fake.
Mike Zuzulo, Global Commodity Analytics says, “They also kind of said without saying that they were going to halt the exports because they said we don’t’ want to sell below cost of production for our producers and that’s essentially this price. So the way I’m reading the tea leaves right now is that they’ve sold enough they’re going to stand on the sidelines and try to get the price to go back up.”
Darin Newsom, Sr. Market Analyst with Barchart says, “If anyone believes any headline coming out of Russia I feel sorry for them. Second, we knew there wasn’t any grain left to steel from Ukraine to begin with there wasn’t much wheat harvest last year and certainly there wasn’t much that got planted. So, this next coming harvest doesn’t look so good for Ukraine either. So you know Russia is taking what it wants and now says now we’re not going to ship anything because there’s nothing to ship.”
Even before invading Ukraine, Russia commonly leaked news about possible grain export bans or increases in their export taxes in an attempt to raise global prices so they could sell at higher levels.
While the headline may have sparked the rally Newsom thinks it was just short covering by the non-commercials who hold an incredibly large short position in the wheat market and it might be short lived. Zuzulo says a close in Kansas City wheat back above the 40-day moving average is the first objective the market needs to meet to convince him the rally has any staying power.
