May 23, 2008

Russia's grain exports falls sharply in April

Russian grain exports were minimal in April because of high tariffs with small volumes of wheat shipped to Mongolia under an inter-government agreement and a small volume of barley exported to Kazakhstan.

Although the market is expecting the start of exports in the new season, exporters are reporting low activity due to a huge spread between this year's crop prices and export prices of the new crop grain.

Uncertainty over tariffs continues to stifle the market.

The latest Egyptian tender showed a huge spread between Russian wheat offer prices -- between US$340-$350 and US$365-$395 C&F.

The spread may be due to uncertainty over export tariffs, as some exporters expect it to be cancelled from July 1, while others expect a sharp drop.

Export prices are still higher than current domestic spot prices, which are around US$354 per tonne EXW. For grain exports to pick up, prices would have to fall by some US$80-$85 per tonne.

Russia's grain exports has been rising rapidly in the past two years, forcing the government to clamp down on such trades in order to prevent rising wheat prices at home.