Geopolitics have hit the Russian wheat market. One of the effects of the sanctions imposed on Russia has been the seemingly inexorable depreciation of the rouble. And, as their currency has plummeted, Russian farmers have accelerated their exports of wheat. The result: domestic prices have shot up.

To curb these exports and bring down prices, the government has tried a number of tactics, including limiting railcar loadings, enforcing various standards and even increasing the intervention price. Finally, to render exports uncompetitive, it has imposed an export duty on wheat, effective from 1st February and lasting through to 30th June. The last time an export ban was imposed was the summer of 2010 when drought and fires ravaged the wheat crop. Prices globally surged higher.

It remains to be seen just how effective this duty will be.

Russian Wheat Production and Exports (Millions of Tonnes)

Source: U.S. Department of Agriculture

About the Author:
Samuel R. Halpert is an analyst at VanEck specializing in the agriculture, coal, steel, forest products, and tanker sectors. Prior to joining VanEck, Mr. Halpert was employed by Goldman Sachs as an analyst/trader for a global macro hedge fund. He was previously Vice President of Institutional Futures Sales at Salomon Smith Barney where he covered Steinhardt, Omega, Kingdon Capital, Soros Fund Management, and Tudor.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.