November 10, 2010

Russia's grain ban might disrupt global wheat supply

Russia's grain ban due to shipping problems is resulting in global wheat shortage, despite the country's robust production and abundant stock position.

As a result, global buyers are expecting shipment from big producers such as US, Australia, Argentina, and Canada as they are expected to have substantial wheat crops this year.

However, concentration of available exportable surpluses in a smaller number of countries than normal that could put pressure on logistics, said an analyst.

The International Grain Council has pegged 181 million tonnes of wheat this year. However, wheat is concentrated in a few major exporters this year due to severe weather problems which forced Russia to cede its share of international trade this season. Thus, transport networks are facing significant strain.

Experts foresee that global wheat prices will be pressured to increase because of the shipment disruption. Furthermore, wheat's elevated levels after soaring to two-year highs in the wake of Russia's ban on grain exports could push wheat markets higher, according to analysts.

US wheat exports are projected at 34 million tonnes this year currently. An analyst said they could rise to 36-37 million and the US would still be able to handle the exports. However, there could be problems if the amount rises higher.