August 10, 2010

Wheat prices end mixed as Russia may extend ban

Wheat prices close mixed, pulled up from early lows by a wave of further crop downgrades, and a warning from Russia's prime minister Vladimir Putin that the country's grain export ban may stretch into next year.

Putin concurred with one of his deputies, Igor Shuvalov, who said last week that Russia's export curbs, which have been timetabled to end at the close of 2010, would be reviewed after the harvest.

The grain crop, which Russia had hoped would match last year's 97 million tonnes, would slump to 65 million tonnes-and could potentially fall to 60 million tonnes-following the country's devastating drought, Putin said, extending a series of downgrades to crops in Black Sea states and Australia on Monday.

The comments helped prices recover some ground from an early fall, with Chicago's September lot closing at US$7.12 ½ a bushel, down 13.25 cents on the day. However, its Kansas peer ended flat, at US$7.20 a bushel.

In Paris, November wheat closed 1.8% higher at EUR213.25 a tonne, with London's November lot ending GBP1.00 higher at GBP153.00 a tonne.

Putin's statement followed a forecast from analysts at SovEcon of an extension to the export ban, noting the need to retain some stocks for next year, besides meeting domestic requirements in 2010-11.

Analysts said the tightness of the wheat balance is aggravated by an expected decline in barley production, which will raise the demand for wheat to produce animal feed in the regions hit by drought.

Russia's grain exports, which topped 20 million tonnes in 2009-10, would fall to 3 million tonnes if the export ban were extended, the analysis group said.

SovEcon analysts also cut their forecast for Russia's wheat crop by 4 million tonnes to 43-44 million tonnes, with the most significant decline, by half or more, expected in the centre of Russia and along the Volga river.