Miller Magazine Issue: 124 April 2020

96 MARKET ANALYSIS MILLER / APRIL 2020 figure “before the end of the trading year” was adjus- ted at the time of the announcement. Kazakhstan, which accounts for a large part of the supply of wheat flour in the world, has stopped them, as well as the export of some other goods. Set quotas for the shipment of wheat. Vietnam, the third largest rice exporter in the world, refused to supply it to overseas buyers, caring for its own food security. Serbia has banned the export of sunflower oil and other goods from the country. The Chinese government, which traditionally pro- duces and consumes a lot of rice, has announced a multiple increase in domestic purchases of this grain, despite the fact that grain stocks, including rice, in sta- te funds are significant. Other bans, in particular, on the export of cereals and some goods, do not have a significant impact on world trade. Nervousness of the situation adds to the complexity of the logistics. Even before quarantine, strikes in France led sellers to fulfill contracts with grain of a different origin. Constant rumors of delays in the ports of Brazil and Argentina also excited the market. Today, all major world ports operate as normal. Some of them introduced a 14-day quarantine requirement for the crew, which makes boat freight more expensive. The only thing positively influenced by the panic was the steps towards meeting between countries that were in protracted trade conflicts. In particular, China and Canada have moved off the ground in canola tra- de, and oil-producing countries quite quickly agree on previously unpopular measures. The more the press discusses the message that there is a threat of a global food shortage in the coming weeks, the more pressure people put on their govern- ments and the situation can turn into a snowball. Yes, stockpiling will temporarily affect exports and con- sumption by processors. But we are not talking about any “fragile situation that could soon call into questi- on the existing consumption model”. Stocks will not be stored forever, which means that soon we will face a sharp collapse in exports and "eating up" of these stocks. Even if in some regions the new crop will be lower than last year, in the whole world it is sufficient and trade flows will be slightly redistributed. At the same time, all these fears develop only due to lack of awareness and data distortion. Local currencies also have a sufficient impact. For example, the Russian ruble weakened during the “oil war” and exporters began to struggle with domestic processors before quarantine was announced in Russia. The high prices on the domestic market spurred the export quotations rust, rumors about an incomprehensible export restri- ction were overwhelmed by this and the rally began. A good example is the situation with sunflower oil. Turkey actively purchased sunflower, but after a ban on its export was forced to switch to unrefined oil. At the same time, the seeds themselves are of no strate- gic interest, and the export ban was rather a response to a failed attempt to increase the export duty. Thus, despite the global bearish trend, sunflower oil received support. Sometimes importers do not see the forest because of the bushes: blindly following some general trend, they do not try to find the cause of its occurrence. But you can play ahead of the curve.