Russian farmers are in no rush to sell their wheat at present as the county’s currency falls to new lows according to HGCA Analyst, Arthur Marshall.
Marshall says the Russian rouble lost 15% of its value against the US dollar between last Friday (December 12) and (Tuesday December 16), and has varied by over 15% in trading yesterday (Wednesday).
He says rising Russian inflation and falling crude oil prices have not helped matters as oil and gas make up a considerable chunk of Russian exports.
According to Marshall as the dollar is the currency of global trade, the slump of the rouble against the dollar has created a big incentive for Russian farmers not to sell their wheat, given the uncertainty over the value of cash. Instead, farmers holding onto the physical wheat has become a much safer hedge than selling it.
He says instead of the possibility of export restrictions, which has kept the market guessing over the past week or so, the Russian currency slump may have a greater impact in reducing available supplies to the world market.
Marshall says supported by events in Russia, UK May-15 feed wheat futures traded above £140/t for the second time in a fortnight this week, before settling at £139/t.
He added that again on Wedensday morning the May-15 contract reached £140.50/t.
Marshall says if events continue to play out as they currently are, upward pressure on prices may well help push UK May-15 wheat futures decisively above £140/t – levels last experienced in early July.
— HGCA (@HGCA_tweet) December 17, 2014