We might be at the cusp of an important event unfolding in commodities markets next year. And Russia will be the determining factor along with Mother Nature as she possibly shifts from a net exporter of wheat to a net importer for the first time in almost two decades.

Running down her dollar reserves, Russia was literally broke by the summer of 1998; what followed was a crash of the economy, a plunging rouble and a debt default of her GKO foreign bonds.

One of the most fundamental shifts in the commodities space occurred back in late 1998 when Russia finally stopped dumping her vast hoards of raw materials on world markets. That secular shift, which saw Russia transition from a net market dumper of commodities to market neutral, continues to impact world prices to this day. Combined with China’s insatiable appetite for commodities amid an incredible infrastructure boom, prices finally bottomed in the fall of 1998.

Just how important Russia is to the vast universe of commodities can be exemplified by palladium’s recent surge.

Palladium, which competes with pricier platinum for global catalytic converters in automobiles, has more than doubled over the last 12 months. And Russia is a prime reason why palladium is surging. Russia’s military has almost exhausted its supply-side dumping of palladium in 2010 resulting in a major price burst as hedge funds ride the bandwagon. Russia has gone from being a net market dumper of palladium to almost market neutral; that’s a seismic shift.

But now wheat prices are causing a big headache for Russia.

Russia, the world’s 3rd largest exporter of wheat from the Black Sea region, halted exports in mid-2010 following one of the worst droughts in history. Record warm temperatures last summer destroyed about one-third of her crop resulting in an export ban in the 3rd quarter.

Russia is likely to become a net importer of wheat for the first time since the 1990s. That shift alone will determine where wheat prices trade in 2011 as fears of a disappointing harvest result in ever higher grain prices.

Russia, which depended heavily on foreign grain during the Soviet-era, mainly from its Cold War nemesis, the United States, now faces the prospects of being a net importer.

If grain growing regions elsewhere in the world post only average harvests next year, prices will surge. The Dow Jones-UBS Grains Total Return Index remains more than 33% below its all-time high in 2008.

The United States is the world’s largest exporter of grains followed by Russia, Argentina, Ukraine, Canada, Australia and Kazakhstan. Grain yields have largely been a disappointment in 2010 as a series of poor harvests, droughts and booming demand contribute to the highest prices since before the credit crisis in 2008.

The grains have now crossed into bull market territory for the second time since mid-2007. I expect this time, however, prices will remain firm as important exporting countries like Russia, and possibly others, run into problems producing enough supplies to cover domestic needs.