January 31, 2012

 

 

Russian wheat export prices soared last week as traders withheld buying of local grains for export amid fear of a possible export duty levy.

 

Traders and analysts believe Russia's government, which has said Russia should export no more than 23-25 million tonnes of grain during this crop year, could consider imposing protective duties from April when exports are likely to hit that level.

 

Crop exports for 2011-12 were expected to hit 20 million tonnes by the end of January.

 

"The market is actively discussing the possibility that export restrictions could be imposed, starting from April, linking them with the record pace," SovEcon analysts wrote.

 

In Russia's main deepwater export ports on the Black Sea, prices for wheat with 11.5% protein content rose to US$265/tonne from US$259/tonne, while wheat with 12.5% protein content rose to US$271 from US$265, according to the Institute for Agricultural Market Studies (IKAR).

 

Prices for grain delivered to port were heard in the region of RUB7,900-8,200 (US$260-US$270), an increase of as much as $10 from the previous week.

 

"Some exporters are at perpetual short covering," IKAR said.

 

Traders said only a few exporters had volumes left to ship, even though Russian grain has been sold forward to Egypt's General Authority for Supply Commodities for shipment as late as end-March. Russian wheat was last sold to GASC at US$266 per tonne including US$14 freight costs.

 

Traders were reluctant to offer wheat for April lifting for fear of falling foul of a possible duty regime, mooted as a possible means of preserving domestic supply before Russia lifted an export ban on July 1, 2011.

 

The ban had been imposed in August 2010 to combat potential shortages after a catastrophic drought.

 

"That is why there are almost no export contracts fixing for April, and consequently, there are no relevant originations in deep continental Russia regions, such as Urals and Western Siberia."

 

Overall stock levels, excluding those at small farms, stood at 42.5 million tonnes, up 13%, reflecting a resurgence in agricultural production, State Statistics Service (Rosstat) data obtained by Reuters showed last week.

 

But in the Southern Federal District, a main producing and exporting region which was comparatively unhurt by the drought and ended the 2010-2011 crop yearwith its elevators overflowing, stocks were down 17% at 7.6 million tonnes.

 

Throughout European Russia, the average offer price for fourth-grade milling wheat ex-works showed more modest gains of RUB150-6,300 (US$5-US$208)/ tonne on average, while third grade milling wheat rose RUB125-6,400 (US$4-US$211)/ tonne.

 

Deepwater corn prices also moved up substantially from US$245-$260/tonne, IKAR said.