Russia will not cap its wheat exports in 2018/19 season

• The SAFEX wheat market posted gains in yesterday’s trade session with the spot price settling at R4 305 per tonne. This was partially on the back of a combination of factors which include the weaker domestic currency against the US dollar, increased commercial buying interest, and spillover support from higher Chicago wheat prices, amongst others.
• The Chicago wheat market was mainly driven by expectations of lower global supplies, as well as speculations that Russia could place a cap on wheat export volume due to expected lower harvest. However, the recent official statement from Russia’s Agricultural Ministry suggests that there won’t be any wheat export limits, despite the expected decline in domestic production.
• This could weigh on the market today given that there were expectations Russia’s Agricultural Ministry will curb 2018/19 wheat exports at 25 million tonnes, which is well below the USDA’s estimate of 35 million tonnes. The market had reacted on this as the expected 10 million tonnes decline in global wheat trade was viewed as a significant volume, particularly this year in which global supplies are already strained due to unfavourable weather conditions in the EU and the Black Sea regions, and parts of China and India.
• We had previously highlighted that developments in Russia have a direct consequence to South Africa as the country is a net importer of wheat, with Russia being the key supplier. In the 2017/18 marketing year, which closes at the end of September 2018, imports could amount to 2.1 million tonnes (revised from the previous estimate of 1.9 million tonnes), according to data from the Supply and Demand Estimates Committee. About 90 percent of this has already landed on our shores, with Russia accounting for more than a third of this volume.
• Aside from the global developments, the weather remains a key focus in the local market as the crop is still at stages of development that requires moisture. The weather charts currently show prospects of good showers within the next eight days in most winter wheat growing provinces. The expected rainfall will not only improve soil moisture and benefit crops but also boost dam levels.

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