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Wheat Settles Lower As Russian Export Cap Comes Into Focus

April 27, 2020 at 19:28 by Andrew Moran

Wheat futures settled more than 1% lower to kick off the trading week as Russia’s exports come into focus. Despite a temporary boost late last month on widespread panic-buying, wheat has been trading in red territory for most of the year. Where will the agricultural commodity go from here?

July wheat futures tumbled $0.0675, or 1.27%, to $5.2375 per bushel at 14:19 GMT on Monday on the Chicago Board of Trade (CBoT). Last week, wheat prices suffered a 3.5% loss, which added to its year-to-date slump of nearly 7%.

The major development in the global wheat industry is Russia. For the first time in more than a decade, markets might be unable to access the Eastern European’s wheat supply as the country limits exports. Major buyers are rushing to import the nation’s wheat inventories, but the flurry of activity is being limited to just four regional trading partners.

Moscow’s shipping restrictions will be in place until sometime in June when farmers initiate their harvest the following month. The government is attempting to protect domestic stockpiles due to food-security fears worldwide amid the coronavirus pandemic. Other neighboring countries, such as Kazakhstan and Ukraine, have also implemented grain export restrictions, triggering concerns about food shortages and soaring prices.

The Ministry of Agriculture has refused to confirm when the last cargo booked under the quota could leave.

Despite Russia burning through much its inventories, analysts say this is a win-win scenario for the nation. Due to weakness in the ruble, the demand for its crops is skyrocketing. Plus, sales from state stockpiles have installed a ceiling on local prices and invigorated its export sector. That said, Russia’s wheat market has only recently recovered after a severe drought in 2010 destroyed its crops, prompting officials to institute restrictions, taxes, and prohibitions.

Overall, experts note that world supplies of milling and feed quality wheat are adequate, but regional tightness is paramount, which is triggering the rerouting of global trade.

In other agricultural commodities, June corn futures plummeted $0.10, or 3.1%, to $3.13 per pound. June soybean futures dipped $0.03, or 0.36%, to $8.365 a bushel. September orange juice futures surged $0.0265, or 2.15%, to $1.1305 per pound.

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