Russia’s decision to halt wheat exports this year has resulted in sharp fluctuations in grain prices in agriculture commodities markets, fanning fears that another global food crisis.

Wildfires have destroyed a 20% of wheat crops in Russia, the world’s 3rd largest wheat exporter, and a record 100 yr drought is still threatening the country’s crop harvests.

The US Department of Agriculture, in a report last week on the World’s demand and supply situation, slashed its Wheat export forecast for the current year for Russia from 15M tonnes to 3M tonnes.

Past lessons show that a volatile global supply can spark another round of price speculation, which will be fueled by fears that Ukraine and Kazakhstan will follow Russia’s export ban export of their grain harvests.

The Global Wheat market has been volatile, with the prices for futures of September delivery shooting up 8.3% to a 2 yr high of US$7.857 a bushel on August 5, before falling back to slightly above US$6.5 this week on official reassurances about supply and profit taking.

Analysts said the sharper-than-expected fall in Russia’s wheat production has a major impact on the Global commodities market.

The US Agriculture Department revised its US production forecast upward by 49M bushels (1.3M tonnes), although Global production was lowered by 15.3M tonnes, mostly on reductions for the dry weather-affected former Soviet states and European countries. The report also raised its forecast for US Wheat exports to 32.7M tonnes.

The ending stocks for the United States, the World’s largest wheat exporter, was 952M bushels (25.9M tonnes), lower than the previous forecast but still the highest in 10 yrs.

It adjusted its forecast for Russia’s wheat production this year downward to 45M tonnes from 53M tonnes. The World’s total Wheat production was forecast to be 646M tonnes.

There is no doubt that a shortage of food supply and price inflation worldwide would have dire consequences for the poorest as those countries, including some in Africa which are struggling to feed their populations, are particularly vulnerable.

The grain export ban imposed by Russia will have the biggest impact on its traditional importers like Egypt and the Middle East countries.

Egypt is the world’s largest wheat importer, importing 5M tonnes a year, and other Middle Eastern countries also rely on imports for most of their grain needs.

It is widely believed that there is no need to panic about food supply, but food security should remain a concern.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Aug 19th, 2010and filed underBRIC, Equities, Latest News, Markets.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site