Well Wednesday’s gains in US wheat futures proved to be a dead cat bounce. This term always amused me, apparently a dead cat may bounce when thrown from a high point but it doesn’t actually get up and run away.
The rally was based on concern Russia would implement export restrictions to wheat this export season. Looking at the numbers you can see why analyst are suggesting this is likely. Also the fact that the Russian government is meeting with major exporters on a fortnightly basis does make one think they wish to keep a close eye on things.
With a wheat crop of 69mt, it’s well under last year’s 85mt record and also under the 75.5mt produced in 2016. In 2016 Russia exported around 28mt of wheat but the previous year was a very poor production year, not like 2017. We must remember that exports were also at a record high last year at 42mt.
The important number as always is ending stocks, if Russia do continue to export what they say they are going to than ending stocks could slip as low as 4.5mt. Now even after the small crop of 2015 ending stocks were kept above 7mt and have remained between 9mt and 11mt since. Considering the volume of wheat that was downgraded by poor weather at harvest than it may well come to light that a slice of that 4.5mt may not be of excellent quality either. We also have their domestic consumption side of the ledger looking a little light on for feed demand so potentially we could see these Russian rumours be confirmed. Maybe not this week or next week, but if exports continue at the current pace we may well see confirmation of some kind pull back in export projections around December.