It’s a predictable part of every market analyst’s presentation to farmers or grain industry groups.
Any unexpected change in a major cropping region around the world could undo all of the analyst’s projections and forecasts.
That is what happened in the global grain market during the past month.
A heat wave and drought in Russia and an embargo on exports from Aug. 15 to Dec. 31 have thrown a giant monkey wrench into world grain markets, with wheat and barley prices hitting highs rarely seen in recent years.
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“This wasn’t on anyone’s radar even a couple of months ago,” said Bruce Burnett, manager of market analysis for the Canadian Wheat Board.
Market watchers knew there was the potential for problems with the Russian crop, but everything seemed fine, and then boom, he said.
It now looks like the Russian grain crop will total about 60 million tonnes, down from 97 million last year.
There’s talk of Russia importing anywhere from 1.5 to five million tonnes of wheat and there’s uncertainty about what other Black Sea region producers, Ukraine and Kazakhstan, will do in terms of limiting exports or selling to Russia.
“The market is going to remain in a state of flux as long as there is uncertainty about the Black Sea situation and all these other things,” said Burnett. “We need more clarity from both a policy and a production point of view.”
With Australia and Argentina yet to harvest and continuing concerns about Canada’s crop quality, it’s a potentially volatile year.
As the week began, Chicago Board of Trade wheat for September delivery rose by 2.1 percent to $6.93 per bushel and the actively traded December contract gained two percent to $7.26.
European milling wheat futures rebounded by a similar amount, with the Paris-based market boosted by strong export activity that was keeping cash market premiums high, according to Reuters news agency.
The news agency also reported that a drier-than-anticipated forecast in some Russian grain areas was also supporting prices, amid worries about prolonged delays in seeding of the winter wheat crop.
The CWB noted in a special market report last week that speculative money market funds are also playing a role in the grain market, Burnett said.
