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Ron and Sue Mortensen: Wheat ban rules the markets
Vladimir Putin announced this morning that there would be an export ban on Russian wheat and grains from August 15th to December 31st. Ships that are currently loading will be allowed to finish and then the Russian loadings will stop. With this government action, anticipated for several weeks, export sales contracts will be cancelled. Buyers will need to find other suppliers or hold off on purchases.
The reassessment of world wheat crop supplies continues on a daily basis. Who knows the true size of the Russian crop? The Kazakh crop estimates are small, but do not seem to change much—10 or 11 million metric tons. It would appear that the EU and Ukraine crops estimates also do not fluctuate much, although both crops are slightly smaller than last year.
Despite the reduced acreage in the US, wheat crop estimates are generally slightly larger than last year. Carryout from the previous year is also very large, so many buyers will look at purchasing some of the substantial supplies here in the US to help fill the gap left by the Russian embargo. Since so much of the Russian exports are feed quality wheat, buyers will also look at increasing US corn purchases.
For the wheat crops currently being planted and grown in the southern hemisphere, there are good areas and then there are worrisome dry areas—western Australia and western Argentina seem the most concerning. This does fit with a La Nina scenario. Market participants are also worried about planting of the next Russian wheat crop. Although it is very early, the fear is that the dryness continues for long enough that the winter wheat crop is planted in very poor conditions or plantings are greatly reduced.
While price surely rations use (wheat futures are up over $3.00 from the lows), all the pieces of the export/import puzzle are not yet in place. Who buys wheat and feedgrains and how aggressively?
Well, that’s really all the news that’s important to the ag markets right now!
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