As always happens, whenever I go away for a couple of weeks of holidays the markets get exciting. Fortunately I was still around when the Russians slammed the door shut on their wheat exporters, which began a round of fun and commotion that’s still going on today. Wheat’s been wild, upping and downing itself on the charts, and who would have expected that from what was seen as the sad sack crop of the year back at seeding time. (You know, a lot of years that’s the way to pick the crop with the greatest likelihood of a rally: pick the one that looks crappiest in March. Because it looks bad, most of the negativity is probably already priced into the crop. Doesn’t always work, but years like this the market can swing wildly the other way when its complacency gets shocked.)
Good thing too, because prairie farmers need the crop for their rotations so even if they don’t like the looks of future prices, they’ve got to grow the stuff so every tick up in wheat is dollars in most prairie farmers’ pockets.
I’ve gotta say I love the brutal way the Russians do things: wheat stocks look iffy, so they bring a big black boot down on the throat of the exporters. I don’t think it would be much fun to be in the Russian grain biz right now. But what should you expect from a fellow like Vladimir Putin, who showed us a couple of years ago how he treated a perceived threat like that posed by unmighty Georgia?
Now, unfortunately for those of you who are growing lots of spring wheat and didn’t price it in the incredible surge that I was hearing about during my holiday, most of the gains since the end of August have been lost. But the gains of July haven’t been lost, and hopefully we’re in a new price range. The highs seem to be getting lower in this new range but the lows seem to be finding resistance at about $7.00 per bushel on the Minneapolis December spring wheat futures contract.
My buzzing little Blackberry told me a few minutes ago that the new Canadian Wheat Board Pool Return Outlook is jacking up new crop values by between $33 and $53 per tonne, narrowing the gap that was forming between most market expectations of likely wheat values and those in the last PRO, which was put together in the midst of the July rally. Durum prices are up $33 to $41 per bushel, malting barley is up $46 and export feed barley PRO values are up $66. That increase takes Number One CWRS with 13.5 percent protein to $7.57 now from $6.12 expected just a month ago (minus transportation and other deductions to port), which is a heck of a bunch of difference.
No one in the world right now is too worried about being able to find durum this winter. But even there this recent rally has dragged up prices sharply, and I suppose we should all thank muscly Vladimir above for setting the overall wheat market alight. This morning I met with some Japanese millers and durum buyers and they told me that they’re anxiously watching the Russian situation. That’s not because they buy Russian durum – they don’t, because it isn’t up to their standards for consistency and quality. But they, like everyone else, has seen this Russian fire get lit under the wheat market and they’re having to adjust their budgets and expectations for purchasing now that wheat of all forms is no longer so cheap.
So, on behalf of farmers on the Canadian prairies, I’d like to thank Vladimir Putin for bringing his boot down on Russian wheat exports and for making the world notice wheat again.