Trading companies that have sold Russian wheat to millers in Asia are considering declaring force majeure on supply contracts after Moscow slapped on grain export curbs, traders said on Friday.
U.S. wheat futures jumped more than 6 percent, taking gains this week to more than 26 percent in a buying frenzy sparked by the move to temporarily halt grain shipments from Russia, the world’s third-largest exporter of the grain.
Chicago Board of Trade front-month wheat futures have nearly doubled since prices bottomed on June 9 at $4.25-Â½ per bushel as Russia’s worst drought on record destroyed crops.
If the contract says Russian wheat, it is straight away force majeure,” said one trader with an international trading company in Singapore. “We haven’t heard but it will happen, even my company will do it.”
It was only a matter of time before companies announced force majeure, said another trader with a global trading company which sells Australian and Black Sea grain into Asia.
I think it’s too early, by the end of the day you will see something. There is a lot of Russian wheat contracted for this region,” he said, adding that the contracts could involve volumes of up to 1 million tonnes.
Russian Prime Minister Vladimir Putin issued an order banning grain and flour exports from Aug. 15 to Dec. 31, with a spokesman saying it would apply to contracts that had been already signed.
Black Sea wheat shipments to Asia have already been delayed as surging global prices and prospects of poor production in the drought-stricken region has prompted suppliers in Russia and Ukraine to hold on to stocks.
Traders said the wheat price rally was unlikely to immediately trigger panic buying as most Asian importers were covered until September.
We don’t see any panic reaction, I think they will wait and see as this is a keen-jerk reaction,” a trader said. “Most buyers are covered until September, so they will wait for a couple of more weeks.