Agribusiness Investing: Is Vladimir Putin Making Good On His Word?

Although the Dow (NYSE:DIA) and S&P 500 (NYSE:SPY) took Monday off for Memorial Day, other markets saw activity. The grain markets were in a buzz over the weekend, as Russia (NYSE:RSX) released some much awaited news. With companies such as Kraft (NYSE:KFT), General Mills (NYSE:GIS), and Ralcorp (NYSE:RAH) raising food prices due to input costs, Russia provided a little relief over the weekend with its wheat export ban lift.

Back on April 29th, I discussed how there was speculation that Russia may end its wheat ban export in July. On Saturday, Prime Minister Vladimir Putin ended the speculation.  He confirmed that Russia will lift the wheat export, and allow grain shipments to continue on July 1st.  The wheat export ban had been in place since last August. In the past, Putin has exclaimed to, “do the utmost to remedy the situation on the grain market and restore our image as a reliable partner.”  Less than a year later, Vladimir Putin appears to be making good on his word.

The increased supply from Russia will certainly help to reduce rising food prices, but it shouldn’t be seen as a permeant fix to our problems.  President of Central States Commodities Inc., Jason Britt said, ” A little more supply will be going out on the market. The knee-jerk reaction is to take this as a negative, but I don’t think Russia is going to be the cure for all our problems.”  Although wheat traders may be experiencing a knee jerk reaction, consumers will be welcoming any relief in food inflation than can get.

Looks like the knee-jerk reaction Britt was discussing was that of the Chicago Board of Trade.  Wheat (NYSE:GRU) for July delivery declined by its largest amount in weeks.  The July wheat contract fell 4.4% to $7.84 per bushel. In the prior two weeks, wheat had climbed 13%.  Investors will need to continue to monitor the effects of Russia’s wheat export ban lift on popular funds such as the PowerShares DB Ag (NYSE:DBA) and Market Vectors Ag (NYSE:MOO).

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Disclosure: No positions.