Even though Russia has decided to temporarily ban grain exports due to a severe drought, AFBF Economist John Anderson doesn’t expect a repeat performance of 2007-2008 when grain prices shot sky high due to global shortages.
Last week, Russian Prime Minister Vladimir Putin announced a ban on grain exports from Russia to begin Aug. 15 and end Dec. 31. The temporary ban covers exports of wheat, rye, corn, wheat flour and wheat and rye flour. The announcement cites concerns about potential domestic shortages and domestic price increases as reasons for the export ban.
“Will we see the kind of thing we saw a couple of years ago with record high wheat prices? At this point I think probably not, because the supply situation is a lot different now, but the market is still maybe a little bit touchy to that kind of thing and I think that how this plays out over the next six months is the critical period,” Anderson said.
“Right now the news reports are ‘Russia is burning up’ and they’re a huge wheat producer and it’s going to have a big impact on the wheat market, but if you look at the grain complex as a whole supplies are much more abundant that they were in 2007-2008, and it would probably take another production cycle of some sort of failure in a major producing country like Australia, Canada or the United States to really get us in a situation where we’ve depleted stocks to those previous levels,” Anderson said.
Due to the largest wheat stocks in more 20 years, the United States stands to pick up more export business because of the move by Russia to stop exporting grain, according to Anderson. “Two months ago we were concerned about a burdensome wheat supply and what that was going to do to our prices. So we’re a long way from running out of grain and the sort of over the top reactions that we had in 2007-2008 are really misplaced right now. We’re a long way from that situation,” he said.