May 4, 2011

 

Russian grain dealers hope to end export ban

 

 

Russian Grain dealers are beginning to shift stocks to ports hoping that the government will permit exports as early as July, according to traders in the country on Tuesday (May 3).

 

Speculation has been increasing that the Kremlin may lift its ban on exports before the 2011 harvest starts in September-October due to a slump in domestic grain prices and reports that millions of tonnes of unsold grain are taking up badly-needed storage space.

 

"It looks like all exporting-orientated companies are actively building stocks by buying wheat, with some of them getting prepared to move grains to the ports," said a grain trader with operations in Russia. "It is not clear yet when the doors will open for exports again, but the optimism is rising that this might be July."

 

Officials have pledged to meet at the end of May to discuss when to allow grain shipments. The Kremlin banned exports last year after the worst drought in a century slashed Russia's grain harvest by about one-third to around 63 million tonnes, but hopes that farmers may reap up to 90 million tonnes this year have prompted calls for an end to the embargo.

 

Dmitry Rylko, of Russian grain forecaster Institute for Agricultural Market Studies, said dealers are moving supplies in a bid to free-up storage space for later in the year. The Russian Grain Union estimates up to eight million tonnes of unsold grain may be held by farmers and in silos in the south of the country.

 

"So far there have been some small movements as grain traders simply try to free up some silos in advance to receive grain of new harvest," said Rylko. "The situation with export ban...softened over the last couple of weeks against the background of the not-bad state of winter grain affairs and ongoing spring grains sowing."

 

Spring grain plantings have been gathering pace in recent weeks after facing early weather delays. Although by April 28 plantings were still down 16.4% on year at 4.273 million hectares, that shows a marked improvement compared with a 31.4% lag the week before.

 

However, dealers remained dubious over whether the Kremlin will make any decision to allow exports before domestic supplies are assured.

 

With near double-digit inflation seen as the top economic problem by the majority of voters, and recent polls putting approval ratings for the country's ruling tandem at an all-time low ahead of polls next year, observers said the Kremlin is unlikely to make moves to put pressure on food prices.

 

"I do not believe any decision has been taken so far in Russia, it would be against the way they operate," said a senior trader. "With lower stocks and an unclear idea of production, I think the surplus will not be big enough to think there will be a completely free market in July."

 

He also said that as storing grain stocks in ports is far more expensive than in the interior, large amounts are unlikely to be moved until exports are certain. Only the state-run United Grains Co., which owns infrastructure in the ports, would be able to hold grain in terminals without facing losses, he added.

 

"We have no plans to move large amounts of grain to export terminals at this time," said a spokesman for the UGC. "The situation with the export ban remains unclear."