Of more importance to grain market speculators are the results of moisture conditions in the US midwest region (namely Kansas where hard red wheat is grown). Preliminary reports from scouts indicate that the region has received some rainfall but not as much as expected.
Russia, India Wheat Exports Won't Calm World Markets - Analysts
Deteriorating prospects for U.S. and European wheat crops mean even the return of exports from Russia and India to world markets this year would be unlikely to lower prices, analysts said.
Futures markets for the world's second-most consumed grain have soared to within sight of record highs this year after a succession of natural disasters, including a historic drought in Russia, spurred fears of a shortage of supplies.
But now even hopes that India will ship its first wheat abroad in five years and speculation that the Kremlin will lift a ban on Russia's exports as early as this summer look unlikely to calm nervous markets.
"We don't expect that the Black Sea region will be able to come into the market in the way it did after the 2008 price rally to supply the world with a significant amount of cheap exports," said London-based Rabobank analyst Erin FitzPatrick.
Grain dealers in Russia are starting to move stocks to ports in the hope that the government will allow exports as early as July. Forecasts for Russia's 2011-12 exports range from around 3 million tons to as high as 10 million tons.
Dmitry Rylko, of Russian forecaster Institute for Agricultural Market Studies, said dealers are hoping to free up storage space for the upcoming harvest. But Russian traders said companies are positioning grain in a bid to ship supplies quickly as soon as the ban is lifted.
"I would assume the Russians want money quickly so, if they can sell, they will sell as soon as they can," said analyst James Dunsterville of Switzerland-based Agrimoney.
In Asia, the U.S. Department of Agriculture's attache predicts that a record wheat crop of 84.2 million tons may prompt New Delhi to allow up to 2 million tons of exports, the first time in five years India would export grain.
Still, with food security concerns high on the political agenda in both countries, a sudden surge in shipments looks unlikely.
Both Russia and India are struggling with near double-digit inflation despite holding excess government grain supplies in some areas. And with polls already under way in India and an election set for next year in Moscow, observers say domestic politics is likely to come ahead of international markets.
Even exports from these producers are unlikely to make up for a fall in output in the U.S. and Europe. Wheat prices have rallied more than 20% since April 16 due to concerns for harvests in the world's two largest exporters as dryness has stressed crops in the ground and excessive rainfall has hindered planting.
Source: CME News for Tomorrow
The Bottom Line: Wheat prices are likely to remain elevated despite the possible re-introduction of Russian and Indian exports due to fundamentally bullish conditions.