Russia Calms Wheat Market

Posted by Matt Hopkins|3 August 2010

Wheat prices stabilized this week after the Russian government allayed export fears by indicating that it will dip into its cereal reserves to meet the demand of its trading partners.

Russia is experiencing its worst drought in 120 years, and the severe conditions have all but decimated the country’s grains. The country’s agriculture ministry is expecting a 75-million-tonne shortfall this year, but much of it is reportedly used for animal feed.

Russia has more than 21 million tonnes of grain stocks, the agriculture ministry says, which is enough to meet domestic demand and also satisfy its export commitments.

The drought has hampered Russia’s initiative to rival the US as a significant producer of the world’s food, which is a policy that the country is expected to redouble once the weather becomes for favorable. As Russia examines its policies and the status of its farmers for the 2011/12 growing season, subsidies and/or inexpensive loans could drive greater demand for inputs as the country tries to replenish its food stocks.