Waiting For The Hammer To Fall

12/05/11 -- Russian PM Vladimir Putin has gone on record this week as saying "crop results must convince us that we fully satisfy our internal necessities" before the existing ban on grain exports would get lifted.

Yet some reports suggest that as much as 10 MMT of surplus grain may have been squirreled away "off the official radar" by Russian growers and merchants hoping to cash in on a "name your own price" bonanza.

Unfortunately for them the export embargo has kept domestic Russian grain prices artificially low - reputedly as much as USD100/tonne below world prices.

Clearly this volume, if it exists, is going to simply have to sit and wait for the export window to re-open. When it does come back onto the market the effect could be immediate. We've had ten months of Russia being out of the market, but you can probably cast your mind back to before that when they were winning just about every Egyptian tender going.

Except at the moment there aren't any Egyptian tenders to fight over. They've got enough wheat of their own thanks to an impending record domestic harvest.

If Russia's export embargo does last beyond the existing summer deadline then you can be certain that Ukraine will be more than keen to fill the temporary void. Ditto Kazakhstan. It looks like there'll be a welter of cheap FSU wheat on the market come harvest, and having spent a while in the wilderness these lads will be even keener than normal to market their stuff aggressively.

The fact that they've accumulated a few question marks as regards their reliability as a supplier will be swiftly forgotten if the price is right. Russia will be doing the market a favour if it keeps the embargo in place until their own harvest is complete. It may however swiftly conclude that it may as well have a slice of the action sooner rather than later if prices keep falling.