Russian wheat export quota failed to help bulls

Andrey Sizov 07.12.2021

Last week, news and rumors about Russian wheat exports regulation were a big market mover. Bulls enjoyed chatter about the strict export quota, but bears were the winner at the end of the week as in reality, the quota is likely to be not a big deal.

Wheat in Chicago and Paris fell sharply last week, losing more than 4% on approaching good harvest in the Southern hemisphere.

Bulls had a good day on Thursday when the market gained around 3% after rumors that Russia could introduce a very restrictive 5 mmt wheat export quota in the second half of the season.

However, those gains were partly erased on Friday when it’s become known that the Russian AgMin proposed a 9 mmt export quota for mid-Feb – June. In line with our expectations, it’s a relatively non-restrictive number, SovEcon estimates February-June 2022 exports at 9-10 mmt based on 33.9 mmt total exports estimate for 2021/22.

It looks like someone earlier misinterpreted the numbers in AgMin’s note which said 9 mmt of wheat and 5 mmt of other grains (corn, barley, and rye).

Bear in mind that at this stage it’s a proposal, not the final number which could be lower. Russian officials remain extremely concerned about the food inflation and believe that they can lower by further restricting exports.

Another point is that USDA’s export forecast of 36 mmt of Russian wheat exports remains extremely optimistic. They will have to lower it sooner or later implying that the world should find another source for a few million tons of wheat amid tight global S&D.