September 2, 2010

Russia may import first US corn in years

Russia's drought could force it to follow China back into the ranks of significant buyers of US corn, underpinning Chicago prices of the grain, the Societe Generale has said.

The comments came ahead of a denial by Yelena Skrynnik, Russia's agriculture minister, that the country would need any grain imports in 2010-11.

Societe Generale said it agreed with forecasts that Russia would import up to 5 million tonnes of grain in 2010-11 to meet demand from the country's fast-growing livestock sector, which is responsible for more than half domestic consumption of cereals.

Latest, and reduced, estimates for the Russia's grain harvest of 60-62 million tonnes implied that the country could not rely on its own production and stockpiles alone to meet domestic requirements of 72 million tonnes.

Russia looked likely to source most of its imports from neighbouring Kazakhstan and Ukraine which, while also suffering drought, have smaller livestock industries and have retained greater export capacity.

Russia's feed wheat prices had, in jumping by some 75% since the end of June, near-matched those of corn in the Gulf of Mexico, on a per-tonne basis. While shipping costs still precluded buying US corn, this hurdle could be eliminated by further rises in feed wheat prices during 2010-11, Societe Generale said.

Russia has not purchased US corn in quantity since; between in the year from May 1999, it imported 1 million tonnes as it bought in some 7 million tonnes of grain, an event in part responsible for the country's focus on expanding in agriculture since.

Analysts believe a "strongly bullish" corn prices, also noting the potential for a downgrade to this year's US corn crop, the world's biggest, and concerns over dry weather in China, the second-ranked producer, and consumer.

China's return to corn imports earlier this year, for the first time in quantity since the mid-1990s, after what is believed to have been a disappointing harvest last year, also attracted huge publicity in Chicago.

Corn for September delivery closed 1.8% higher at US$4.32 ¼ a bushel, within an ace of the 14-month high for a spot contract, with the better traded December contract up 1.7% at US$4.46 ¾ a bushel.