July 28, 2010

 

Russia denies grain export ban

 

 

Russia has denied market talk on Tuesday (Jul 27) that it was restricting grain exports, pulling European wheat prices back from contract highs but concerns about the impact of Russia's drought remain.

 

Traders said Russia's drought could lead Moscow to restrict exports if it judged its internal food security was at risk or on worries rising grain prices could threaten inflation rates.

 

But in a statement issued within minutes of the grain price spike, a Russian agriculture ministry spokeswoman said, "The ministry has not sent any grain export restrictions proposals to the government."

 

By 1258 GMT benchmark November milling wheat futures were up 2.1% at EUR181.25 (US$236.2) per tonne after a new contract high of EUR184.25 (US$240.1) a tonne a few minutes earlier.

 

Traders said the price had spiked on speculation stemming from an analyst note that there was a "high chance" Russia would ban exports to keep domestic prices from rising further and boosting food inflation amid heat and drought.

 

"If Russia took such a decision, it would open an avenue for US and European wheat exports," Sebastien Poncelet, analyst with France's Agritel said.

 

The Russian agriculture ministry said last week drought had killed crops on 10 million hectares, without specifying losses of grain, which had been sown on 43.6 million hectares.

 

Earlier on Tuesday Russia's Deputy Economy Minister Andrei Klepach said the country may harvest less than 80 million tonnes of grain this year, against a previous official grain crop forecast of 80-85 million tonnes. Just before that, SovEcon agricultural analysts said the drought might cut the Russian grain production even further - to less than 70 million tonnes.

 

In a sign that weather problems might be becoming even more entrenched in the region, leading analyst UkrAgroConsult said on Tuesday Ukraine's government may limit food grain exports in the second half of the 2010/11 season to avoid domestic shortages in the wake of crop damage.

 

Frosts and drought have destroyed about one million hectares of Ukrainian grain crops and the government has said the harvest could fall to 42 million tonnes in 2010 from 46 million in 2009 and 53.3 million in 2008.