Wheat Heads for Weekly Gain While Russia Considers Export Limits
(Bloomberg) -- Russia, the world’s biggest wheat exporter, proposed limiting grain shipments to protect its own food security in the face of the spreading coronavirus pandemic.
The quota being considered is loose enough that grain shipments will likely keep flowing as normal. Still, the move shows that governments are focusing on feeding their own populations as the virus disrupts supply chains around the world.
“Given the current situation, the issue of food security is coming to the foreground,” Russia’s Agriculture Ministry said in a statement.
The market largely shrugged off the news. Wheat futures rose 0.4%, paring some of their earlier advance. Still, futures in Chicago rose nearly 6% this week and hit a two-month high as consumers hoard staples like flour and bread amid the pandemic. Cash prices in Canada for durum wheat, the kind used to make pasta, reached the highest in more than two years.
Russia has a history of shaking up the wheat market by restricting exports through taxes, bans or informal limits. The country’s domestic wheat prices have climbed in recent months as a weaker ruble made supplies more appealing to overseas buyers. Some food producers have asked the state to curb rising costs.
“They’re doing their best to ensure domestic food security for Russia,” said Matt Ammermann, a commodity risk manager at INTL FCStone.
Kazakhstan, Serbia and Vietnam have already banned or placed limits on exports for some products, such as flour or sunflower oil.
Russia’s Agriculture Ministry wants to limit exports of some grains including wheat to 7 million tons in the three months through June. The quota would also affect rye, barley and corn, but Russia doesn’t export much of those products at this time of year.
Capping wheat shipments at that amount would mean sales are still in line with most estimates for the full season. The measures still need to be approved by the Cabinet before they take effect.
“This is a comfortable level,” said Dmitry Rylko, director general at the Institute for Agricultural Market Studies. If the government doesn’t tighten curbs, “the industry will operate normally.”
So far, a handful of nations have moved to secure food supplies. Kazakhstan, one of the biggest shippers of wheat flour, banned exports of the product, along with carrots, sugar and potatoes. Serbia has stopped shipments of some goods and Vietnam temporarily suspended new rice export contracts.
©2020 Bloomberg L.P.