Black Sea export bans lifted

News of Black Sea export bans being lifted for the 2011–12 season has stirred the commodity market.

Russian officials confirmed last week they would allow the self-imposed grain export ban to expire on July 1, permitting sales of Russian wheat to re-enter the market.

Exports will resume during July, but speculation about crop size and actual export surplus has created uncertainly for traders about the volumes that will be available in the market.

In its May export forecast, the US Department of Agriculture estimated Russian exports to be about 10 million metric tonnes (mmt) of wheat and 0.8mmt of barley. But the Russian Grain Union has indicated a grain export surplus of 15mmt.

Russia’s Agriculture Ministry has indicated the 2011 Russian grain harvest was forecast to reach 85–90mmt, up from the 2010 forecast of 60.9mmt.

This is a positive outlook, given seeding is still underway in the spring grain areas and almost 77 per cent of the 30.2 million hectares is sown.

The Ukraine also removed its grain export quotas earlier this month and sales have started to buyers in the Middle East and North Africa.

Output from the Ukraine is estimated to be up more than 5mmt to 22mmt this year and traders expect the country’s wheat exports will almost double to 10mmt for the 2011–12 season.

With Russia and the Ukraine returning to the wheat export market, the demand and supply gap being created by unseasonably dry condition across Europe may be reduced. Many parts of Europe have received less than 40 per cent of normal spring rainfall.

As that gap reduces, growers will be watching prices as, traditionally, this type of influx would have a negative affect on the market and drive prices down.

But extreme weather conditions in the US and the EU are keeping prices high and growers should not expect a significant price drop resulting from the resumption of Black Sea exports.

Wet weather across America’s Northern Plains and in Canada, including unprecedented flooding in Montana, have delayed seeding and caused many growers to revisit crop plans for 2011.

Some growers are considering a shift from corn to oilseeds and big areas of farming land may go unsown as the season progresses.

There is also concern about the US winter wheat crop, as about 45 per cent is estimated to be in poor to very poor condition. Overall, expectations for US wheat exports are down 6.5mmt to 29mmt for the next marketing year.

As would be expected, weather is also affecting other grain commodities.

Dry conditions in Europe have resulted in the futures exchange MATIFF to reach historically high levels and this has caused canola futures to rally strongly. This year’s EU canola production could be as low as 18.5mmt.

The EU barley crop is also estimated to be around 50mmt this year, which is down from an average of 59mmt. Without EU exports the world’s barley importers, including Saudi Arabia, China, and Japan, will rely heavily on Australian and Black Sea origin grain.