Russian Premier Putin lately said that the government decided forbids the grain and the grain products outlet temporarily. These agricultural products include wheat, mix wheat, barley, rye, corn, wheat bread flour, wheat and rye mix system bread flour. Embargo's measure from August 15 will implement to December 31. The main reason is to control the rising grain prices driven by drought and conflagration.

 

Since June, the Russian some areas have continued the high temperature arid weather. Grain yield is predicted decline substantially. Wheat yield is estimated to reduce by 30% approximately. That drives grain prices in Russia rising substantially.

 

The embargo order immediately causes prices soaring in the international market. Chinese begin to worry about domestic grain prices. In fact, Chinese wheat price is increasing recently. Is that connected to Russian conflagration? Is the fire really “spreading” to China? Mr. Ma Wenfeng, a BOABC analyst said that the reasons of wheat prices rise in domestic and international markets are actually different. In the international market, wheat prices were low in last several years causing the reduction of yield. Consequently, wheat prices show an upward trend due to the shortage of supply. Russian conflagration is also a factor. However, in Chinese market, wheat prices rise is caused by macroeconomic policy, irrelevant to supply. And the macroeconomic policy has more influence on future market than spot market. Therefore, short-term fluctuation may be shown in future market while spot market will remain stable. Overall, considering domestic supply is sufficient, the Russian embargo order will not impact on domestic market.