Back in the grain market

With Russia lifting a year long grain export ban, on the back of optimistic grain harvest forecasts, Business RT spoke with Alastair McCaig from financial services company WorldSpreads, about the impact on global grain markets.

RT:  Will Russian grain flood the market and bring about an end to the grain bull market, causing prices to fall?

AM:  "Well I think grain and wheat, like any product, is affected by supply and demand, and with the increase in supply that Russia’s lifting of the ban will offer, we should see a softening in the prices globally, of most of these crops.However, it should be pointed out that the major overriding factors still are crop figures globally, weather conditions as well, and those will be the points that really move the underlying price.”

RT:  Will the influx be enough to contain global price growth or is the international shortage still inevitable?

AM:  “I think short term the extra supply will help to cool the price in the crops, it will make them drift a little bit lower.It isn’t a complete surprise, the markets have been anticipating it for a couple of months now, and we have seen the reaction in the prices in all of the futures.So it will have a short term affect, but longer term we’ve still got global issues with crop supplies, and I think that just generally there is a shortage, so I don’t think it will do enough to completely turn the trend as it were.But short term it should cool the prices.”

RT:  Could Russian producers get lured by higher prices abroad and thus leave the domestic market short?

AM:  “Well having been banned from getting any exposure to the global market, the Russian farmers and producers will be keen to gain some sort of exposure there.And the rough indication that we are getting at this point in time is that there is a possibility that maybe say 15 million tonnes of excess supply on top of what is anticipated to be Russia’s demand.Having said that of course, Russia has shown that historically that it has no fears about stepping into the market and preventing these exports if they fear supply to the local market would be in short supply.I don’t think the agricultural ministry would let that happen.”

RT:  What’s your outlook for wheat prices and what are the key drivers?

AM:  “Well again, as I said earlier, ultimately supply and demand are always the key drivers in this. Supply has been affected globally by poor weather conditions, so there is a healthy shortage in crops. This comes as a welcome respite in the short term, increasing Russian supply, but you only need to look across the border at Ukraine and see that their figures are down roughly 43 % on the year to know that it will be snapped up pretty quickly.  So short term I think that you will see the prices cool a little bit but long term I think you will probably see prices spike higher as demand dictates.”