A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
A look at the news

A return to Russian and Ukrainian exports: how will markets react?

6 June 2011


The official announcements were made on 25th and 26th May via national news agencies: Ukraine will probably lift its restrictions on the export of cereals in the “coming days” and for their part, Russia has also indicated that there was “no reason to prolong the embargo”.

The terms used are crucial, as in recent weeks we have seen the importance of market players’ expectations following the announcements of these two agricultural giants.

Remember that due to drought and an unprecedented heat wave in summer 2010, Russia and Ukraine declared an embargo on their exports of cereals in August, which at the time was set up until December 2010, the embargo was later extended until 1st July 2011. In response to these announcements, markets soared, resulting in increased volatility in agricultural prices, but the physical fundamentals were not affected at the time.

This confirms that agricultural markets have now become complex markets of anticipation where the psychology of market players is one of the main factors in explaining agricultural price volatility, and this, even before market “fundamentals”, as recently pointed out in the Financial Times 1.

So, how will markets react to these new announcements?

Agricultural commodity prices are predicted to fall, but nothing is less certain. Everything depends on how the players react to the announcements and their perceived credibility. However, one thing is certain: as soon as the announcements are made by Russian and Ukrainian authorities on lifting embargoes, players will take up and multiply their positions and, yet again, will risk provoking turmoil in agricultural markets.

1 Please see momagri article of 30/05/11 : http://www.momagri.org/UK/a-look-at-the-news/The-Financial-Times-links-volatility-with-the-psychology-of-market-players_917.html

 

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