The move is contemplated partly because Kazakhstan, a major flour supplier to Russia, recently banned exports of flour
Reactions are mixed to reports that Russia is considering limiting its wheat exports in 2019-20.
“If they were to do something, that certainly will have a significant impact on global wheat trade and prices,” said Justin Gilpin, chief executive officer of the Kansas Wheat Commission.
Talk of a Russian export quota is adding to the momentum that was already building in the wheat market due to the stockpiling of flour and the first significant sale of American wheat to China in two years.
Jim Peterson, marketing director of the North Dakota Wheat Commission, agrees with his U.S. colleague’s assessment of the Russia news.
“I think it does have some potential to move the market,” he said.
Peterson thinks there could be a run on flour and a stockpiling of wheat in the Middle East as countries in the region grapple with the COVID-19 pandemic.
“That could open up some opportunities for U.S. or Canada to fill some voids if Russia does put that ban on,” he said.
His advice to growers is to sell some new crop wheat when the market experiences mini-rallies like this because the long-term outlook is poor due to the slumping global economy. Corn is also dragging wheat down due to waning ethanol demand.
MarketsFarm analyst Bruce Burnett has a different take on the news out of Russia that the agriculture ministry has proposed a seven million tonne quota on grain exports for the April-through-June period. The proposal requires government approval.
“The amount appears to me to be pretty generous,” he said.
“If they had zero that would be different.”
The proposed quota would be for wheat, corn, barley and rye exports but practically speaking it would be a wheat quota because very little of the other commodities are shipped during that period.
So it would amount to a quota of about 2.3 million tonnes of Russian wheat exports per month at the tail end of the 2019-20 marketing campaign.
“They can do more, but that’s a pretty decent export program for that time of year,” said Burnett.
One of the reasons Russia is contemplating a quota is that Kazakhstan has banned exports of flour. Kazakhstan is the world’s second biggest flour exporter behind Turkey. Most of its exports go to Russia.
There have also been reports of Ukraine restricting wheat exports. But the Ukrainian Grain Association says it has met with government officials and has received assurances there will be no limits on the exports of agricultural products, according to an APK-Inform story.
If Russia implements an April-June quota and then extends it into the new crop year that would be extremely bullish for the wheat market. But Burnett doesn’t see that happening.
Russia’s winter wheat crop is in good condition. There were some dryness concerns in Ukraine but he said soil moisture is now adequate.
Gilpin said there was quite a bit of dryness this fall in the hard red winter wheat region of the U.S., leading to emergence problems.
“(The wheat) is pretty small and we’ve got lower tiller counts at this time of year than we’d like to see,” he said.
There has been pretty good moisture since the crop emerged, which has largely alleviated the dryness concerns.
Over three-quarters of Oklahoma’s crop is rated good-to-excellent and the ratings in Texas, Kansas and Colorado have been steadily improving.
“The crop is looking better than what it did going into winter and dormancy,” said Gilpin.
“It looks like it has favourable yield potential.”
The tale will be told in April and May, which are critical months for rainfall.
The International Grains Council is forecasting 768 million tonnes of global wheat production in 2020-21, up five million tonnes from the previous year.
Carry-out stocks are forecast at 283 million tonnes, an eight-million-tonne increase, despite the recent surge in demand for milling wheat due to flour hoarding.
“While some commodities have seen a sharp upturn in nearby demand, especially for rice and wheat-based foods, weakening economic conditions could dampen usage in the longer term,” said the IGC.