Jonathan Lane, Trading Manager at Gleadell, provides the latest insight into the grain markets, which have seen a lot of activity this week over drought in South America and freezes in Russia and the Ukraine.

The firmer markets of last week continued for most of this week as weather concerns intensified. Reports of record low temperatures in Russia have raised concerns over potential crop damage, especially in exposed areas or with low snow cover. The production forecast for the Ukraine’s winter grain harvest continues to fall as crops, already stressed by drought, are now hit with extreme cold weather.

The market has its focus on the meeting due today, when the Russian government will determine how much grain could be exported this season before it considers imposing a protective duty to secure supplies within the country. With approximately 20mln/t exported by end of January, and initial limits of 24-25mln/t already declared, the current pace would likely reach the ‘target’ by the end of March. 

Short-term, the bulls have had enough to move the market higher, although much of the bullish news is already in the market. Medium and long term price movement will depend on the severity of the current weather concerns and the impact upon actual crop production, as current stocks of wheat and coarse grains remain abundant.

Summary

• The Argentine government confirms it will not ban corn/soy exports, responding to talk that it might be due to a harsh drought.
• Canadian 2012/13 grain output is seen up 8% at 50.3mln/t – mainly due to a return to drier planting conditions.
• Ukraine’s 2012 maize crop could increase 10% to 25mln/t – due to an increase of area compensating damaged winter grains.
• Russia could impose a grain export duty from April 2012 – government to set target on 2^nd February.
• Russian state weather forecaster reports cold snap may have damaged winter wheat in exposed area/low snow cover.
• Russian export wheat prices continue to rise as traders become hesitate about buying grain, fearing export duties.
• Ukraine 2012 winter grain harvest could fall 42-58% to between 10 and 14mln/t - wheat crop may fall to 12mln/t (22.3mln/t in 2011).
• CWB adds the Ukraine to the list of countries that might impose crop export restrictions.
• EU wheat touches 7-month high on concerns that bitterly cold weather in Europe may damage crops.
• Ukraine’s January grain exports fell 27% to 1.9mln/t compared with December – 11.6mln/t exported so far this season.